EDP (EDP) H2 2014 earnings summary

Executive summary

• EBITDA rose 1% to €3.642bn in 2014 despite regulatory changes, weak prices and drought; adjusted EBITDA fell 3% YoY.

• Net profit increased 4% to €1.040bn; adjusted net profit was €905m, down 8% YoY.

• Resilient performance was supported by cost control, energy management, regulated operations and a diversified portfolio.

Financial highlights

• Operating costs fell 1% on a consolidated basis; efficiency programs delivered €144m of savings, ahead of the 2015 target.

• Net investments declined 20% YoY to €1.79bn, reflecting CapEx control; adjusted for pending U.S. asset-rotation proceeds, investments would be below €1.6bn.

• Reported net profit included a €118m gain on the sale of 50% of EDP Asia and a €61m Portuguese energy tax expense.

• 2014 EPS was €0.285; the proposed cash dividend was €0.185 per share, a 65% payout.

Outlook and guidance

• 2015 guidance: EBITDA above €3.6bn, net profit above €900m, average cost of debt of 4.6% and net debt below €17bn.

• 2015 assumptions include average hydro conditions, Brazil GSF of 86% and no power rationing; each 1 percentage-point lower GSF could reduce Brazil EBITDA by BRL 37m.

• At least €800m of Portuguese tariff-deficit securitization was targeted for 2015; 2014 securitizations exceeded €1.2bn.

• The €0.185 dividend was reaffirmed as a floor; the 2017 target remains net debt/EBITDA of 3x.

• Recurring free cash flow was expected to reach ~€500m annually in 2016–17, excluding disposals and tariff-deficit working-capital changes.