Focus on 2015 results. Comment by Marc Benayoun, CEO of Edison
The deep changes that characterized energy markets in recent years require to look at the future with a new approach that should be reflected not only in our strategies, but also in the value of our assets. With this in mind, the positive operating and financial results achieved in 2015 confirm that Edison is in good shape, able to react to the external environment and ready to seize opportunities in a market that is still undergoing a major transformation.
Even though the Italian economy is showing feeble signs of improvement throughout the 2015, with an increase in GDP of about 0.7%, the energy markets confirmed their weakness, characterized by consumption stagnation, exceptionally low prices and strong pressure on margins.
The increases marked in 2015 in the Italian electricity consumption (+1.5% compared with 2014) and gas (+9.1% compared with 2014) were almost entirely weather related, attributable to temperature and rainfall levels, while prices for power and gas reached the bottom. Moreover, oil price dropped: in just one year, the price per barrel halved compared to about 100 dollars during the previous four years, following a downward trend that brought it at 30 dollars at the beginning of 2016.
In this challenging environment, Edison will continue to work with the aim of anticipating market and regulatory changes, leveraging its competencies and strengthening its position both in the final market and the energy services market. All of the above keeping flexible and reactive and preserving the value of its existing investments.
Despite the challenging market environment described above, Edison 2015 EBITDA rose to 1,261 million euros, up from 814 million euros in 2014, thanks to the successful arbitral award for the last gas contract and the program implemented to cut operating costs, which decreased by 12% in 2015 on a comparable scope of consolidation basis. These results off-set the impact on margins caused by the collapse in crude oil prices, the contraction of thermoelectric generation margins and the lower hydropower production compared to the exceptional 2014 levels.
The cash flow, which was positive by more than 600 million euros in 2015, benefited from the successful management of operating working capital during the year and contributed to the Group’s financial strength (debt/ EBITDA ratio close to 1). However, the future market scenario, regarding both oil and power & gas prices, made necessary a writedown up to 1,534 million euros to adjust the book values to the low profitability of the current energy markets. As a result , the bottom line registered a loss for 980 million euros.”
This is an excerpt from the Letter to Shareholders from the Report on Operations 2015. Download the full text below.