EDP (EDP) H2 2015 earnings summary

Executive summary

• EBITDA rose 8% in 2015, including value-accretive deal gains; adjusted EBITDA increased 2% YoY excluding gains and non-recurring items.ocument-source]0ocument-source]

• Weak Iberian hydro and lower energy-management gains weighed on earnings; net profit fell 12% to EUR 913m. Management expects improved weather and market conditions in 2016.ocument-source]2ocument-source]

• Strategy remains focused on contracted renewables and regulated networks, alongside CapEx discipline, deleveraging and a predictable dividend.ocument-source]19ocument-source]

Financial highlights

• Adjusted net profit was EUR 750m versus EUR 905m, down 17%; management cited EUR 850m as a normalized basis assuming normal hydro conditions.ocument-source]14ocument-source]

• The estimated adverse weather and market impact on adjusted net profit was EUR 110m; management expected to recover a large portion in 2016.ocument-source]15ocument-source]

• Operating costs fell 1%, excluding capacity expansion in renewables and Brazil; the efficiency program generated $117m of cumulative annual savings.ocument-source]13ocument-source]

• Net financial costs increased EUR 261m; average cost of debt was flat at 4.7%, while FX losses were EUR 35m.ocument-source]32ocument-source]

Outlook and guidance

• 2016 EBITDA expected slightly above EUR 3.6bn, supported by Iberian generation recovery, new capacity and a full year of Pecém consolidation.ocument-source]16ocument-source]

• Reported net profit guidance was EUR 900m or higher, with no material non-recurring items anticipated; guidance includes Portugal's full special sector tax for 2016.ocument-source]18ocument-source]

• Net debt target was EUR 16.5bn or lower in 2016; net investment expected to decline from EUR 1.7bn in 2015 to EUR 1.3bn.ocument-source]18ocument-source]

• Forecast demand: Brazil down 3% and Iberia up 1%; 2016 social-tariff budget included EUR 12m–13m.ocument-source]77ocument-source]

• Management expected at least EUR 100m of adjusted net profit uplift from normalized hydro versus 2015, comprising over EUR 80m in Iberia and ~EUR 20m in Brazil.ocument-source]41ocument-source]