Milan, July 30, 2015 – Edison’s Board of Directors, meeting yesterday, reviewed the Semiannual Report at June 30, 2015 and confirmed the EBITDA targets of at least 1 billion euros for the full year including the arbitration for the gas supply from Libya. The target will be achieved also thanks to the benefit of programs implemented by the company to reduce operating costs, despite the energy market continues to be characterized by sharply lower oil prices and weak electric power demand.
Operating Performance of the Group at June 30, 2015
In the first half of 2015, demand for electric power held relatively steady compared with the same period last year, while consumption of natural gas staged a significant rebound, even though Brent prices followed a downward trend.
More specifically, Italian demand for electric power totaled 153.2 TWh (-0.3% compared with 153.7 TWh in the same period in 2014), with a sharp reduction in hydroelectric production, due to a lower availability of water resources during the period, compared with the exceptional levels recorded in the first half of 2014. The reduction was offset by a gain in thermoelectric production (+4%), an increase in the output from renewable-sources (+9%) and higher net imports (+3%).
Consumption of natural gas increased by 7.9% to 35.2 billion cubic meters in the first half of 2015 (32.7 billion cubic meters in the same period last year), thanks to a pickup in demand for gas from residential customers—due to lower average temperatures during the winter months compared with those experienced in the first half of 2014—and from thermoelectric power plants, which ramped up production to compensate for the significant reduction in hydroelectric output. On the procurement side, there was a significant increase in the volumes drawn from the stored gas inventory during the first six months of the year.
In this scenario, Edison ended the first half of the year with sales revenues of 5,619 million euros, down from 6,111 million euros in the same period in 2014, due to a reduction in average sales prices, driven by the benchmark scenario. The effect of this decline was particularly pronounced for the electric power operations, which reported lower revenues of 3,284 million euros in the first half of 2015 (3,869 million euros in the same period of 2014), while the hydrocarbons operations were able to more than offset the effect of lower sales prices with an increase in sales volumes, contributing 2,717 million euros to total revenues (+5.1% compared with 2,585 million euros in the first half of 2014).
EBITDA decreased to 204 million euros, compared with 423 million euros in the first half of 2014, when the volume of available water resources reached an all-time high, boosting the margins of the electric power operations. More in detail, the adjusted EBITDA[1] of the electric power operations declined to 208 million euros (364 million euros in the first half of 2014) due to a contraction of sales margins, caused by a reduction in sales prices, and a lower availability of water resources compared with the exceptional levels recorded in the first half of last year. Renewable energy sources provided a positive contribution, thanks also to changes in perimeter. The adjusted EBITDA2 of the hydrocarbons operations decreased to 42 million euros (118 million euros first half of 2014), due mainly to the slump in oil prices. The negative trend in Brent prices adversely affected E&P activities both in Italy and abroad, where, however, the upward revision of the sales price of natural gas obtained in Egypt is beginning to have a positive effect. The gas supply and sales activities continue to be characterized by strong competitive pressure on sales margins. To address this situation, Edison is engaged in completing a second round of price renegotiations for its gas procurement contracts, in the belief that it is essential to restore to a reasonable level of profitability its portfolio of procurement contracts.
EBIT were negative by 155 million euros (+324 million euros in the first half of last year). This result reflects the impact of the reduction in margins mentioned above, an increase in depreciation, amortization chiefly related to exploration costs, mainly in Norway, the negative effect of the fair value measurement of commodity hedging positions, which was particularly positive in the first half of 2014 (-48 million euros compared with +157 million euros in the first six months of 2014).
The result before taxes was negative by 152 million euros (+249 million euros in the first half of 2014), due to the effects of the dynamics described above, offset in part by net financial income of 6 million euros (-82 million euros in the first half of 2014), mainly consisting of foreign exchange gains, lower debt level and lower borrowing costs.
Edison ended the first half of 2015 with a Group interest in net loss of 207 million euros (+116 million euros in the first six months of 2014). The loss also reflects the effects of the ruling of unconstitutionality of the Robin Hood Tax, which had a negative nonrecurring impact of 68 million euros, mitigated in part by the reduction in the tax rate produced by the abovementioned ruling starting in 2015.
Net financial debt at June 30, 2015 improved, decreasing to 1,679 million euros, from 1,766 million euros at the end of 2014.This reduction is chiefly the result of lower operating working capital in a context of growing investments, especially in the E&P area.
It is also worth mentioning that the euro 500-million bond issued in 2010 was reimbursed at maturity in March 2015 by means of internally available liquidity.
Outlook
Edison confirms EBITDA guidance of at least 1 billion euros for 2015, taking into account the impact of the arbitration regarding the gas supply contract from Libya expected in the second half of the year, the effects of the decline in oil prices and the benefit of programs implemented by the Company to reduce operating costs.
Key Events in the First Half of 2015
January 13 – Edison signs a put&call option to acquire from Apache Beryl I (a subsidiary of Apache Corporation) its interests in the Scott and Telford oil fields (10.5% and 15.7%, respectively) located in the P185 15/22 concession in the British North Sea.
April 15 – The Ministry of the Environment and the Protection of the Territory and the Sea, in concert with the Ministry of Cultural Assets and Activities and Tourism, greenlights Edison’s project to optimize the recovery of hydrocarbons from the Rospo Mare offshore field by means of four new wells and an upgrade of the equipment currently installed on the Rospo Mare B platform. The Rospo Mare offshore field, which is in production since 1982 and includes three oil platforms (Rospo Mare A-B-C) and a storage vessel, is located in the Adriatic Sea opposite the coast of the Abruzzo and Molise regions, about 20 km east of the town of Vasto. The field is managed by Edison, as operator at 62%, in a joint venture with Eni at 38%.
April 16 – The Ministry of the Environment and the Protection of the Territory and the Sea, in concert with the Ministry of Cultural Assets and Activities and Tourism, greenlights Edison’s Vega B project to fully realize the value of the Vega oil field, which Edison manages since 1987 as operator at 60%, in a joint venture with Eni at 40%. This project, which in accordance with the concession’s original development plan will include the construction of a satellite platform with four wells (VegaB) connected with the existing oil platform, will generate important benefits for the local community in term of investments, jobs and ancillary economic activity.
April 30 – Edison closes the transaction mentioned above acquiring from Apache Beryl I its interests in the Scott and Telford oil fields (10.5% and 15.7%, respectively), thereby increasing its reserves by 8.7 million barrels of oil equivalent (85% oil and 15% gas). Thanks to this transaction, Edison’s total production in the
United Kingdom will increase to about 6,500 barrels of oil equivalent a day, bringing Edison’s total production to 53,000 barrels of oil equivalent a day.
June 16 – Edison inaugurates a new Hydrocarbon Laboratory at its Research, Innovation and Development Center in Trofarello (Turin), an Italian center of excellence for the development of innovative solutions in the areas of energy efficiency and environmental safety for the growth of the Group’s businesses. The Hydrocarbon Laboratory is comprised of the Geochemistry, Geomechanics and Petrophysics sections, all equipped with cutting-edge tools for the development of special sponges capable of cleaning the sea and increasingly effective algorithms to study gas and oil bearing rock formations and for acquisition of 3D images.
Significant Events Occurring Since June 30, 2015
July 23 – Edison and QALAA Energy sign a joint development agreement for the construction an 180 MW power plant (gas fired, combined-cycle facility) that will produce electric power for Egyptian customers using gas produced from the Abu Qir concession in the Nile Delta. The agreement calls for Edison and QALAA Energy to complete the plant’s development and permit phase within the next six months, with the facility expected to go on stream in 2017. The construction time is extremely short thanks to the fact that the power plant will be located within the industrial compound of the Abu Qir gas treatment facility and the use of some important thermoelectric components provided by Edison.
July 24 – Edison and the Egyptian General Petroleum Corporation (EGPC), Egypt’s national oil company, finalize an agreement to revise the gas supply price. Under the agreement, a new indexing formula aligns the sales price of gas with market conditions, taking into account the decrease in the value of Brent crude and the sustainability of new investment in Egypt. Edison’s entire oil and gas production in Egypt is sold to EGPC to meet internal demand.
Pertinent Documents
Edison announces that the Semiannual Report at June 30, 2015 of the Edison Group, approved yesterday by the Board of Directors of Edison Spa, will be available to the public on July, 30 at the Company’s head office, on the websites of Borsa Italiana Spa (www.borsaitaliana.it) and Edison Spa (www.edison.it/it/relazioni-infra-annuali), and through the authorized storage mechanism “NIS-Storage” (www.emarketstorage.com).
Edison’s External Relations Department
Andrea Prandi
External Relations Director
02 6222 7331
Elena Distaso
Head of Media Relations
02 6222 8522
Lucia Caltagirone
02 6222 8283
Investor Relations Edison:
02 62228415 - investor.relations@edison.it
As required by Article 154-bis, Section 2, of the Uniform Finance Code (Legislative Decree No. 58/1998), Didier Calvez and Roberto Buccelli, in their capacity as “Dirigenti Preposti alla redazione dei documenti contabili societari” of Edison Spa, attest that the accounting information contained in this press release is consistent with the data in the Company’s documents, books of accounts and other accounting records. The Semiannual Report at June 30, 2015 was subject to a limited audit.
This press release and, specifically, the section entitled “Business Outlook” contains forward-looking statements. These statements are based on the Group’s current projections and expectations with regard to future events, which, by their very nature, are subject to an intrinsic component of risk and uncertainty. Actual results could be materially different from those contained in the abovementioned statements due to a number of factors, including continued volatility and a deterioration of the capital and financial markets, fluctuations in raw material prices, changes in macroeconomic conditions and economic growth rates and other changes in business conditions, the outcome of the arbitration proceedings for the gas procurement contracts, changes in the statutory and regulatory framework and institutional scenario (both in Italy and abroad), and many other factors, most of which are beyond the Group’s control.
The Group’s income statement, showing the other components of the comprehensive income statement, balance sheet, cash flow statement and the statement of changes in consolidated shareholders’ equity are annexed to this press release.
Public disclosure required by Consob Resolution No. 11971 of May 14, 1999, as amended.
