Spain's Endesa misses expectations on lower energy and gas prices
MADRID, Feb 28 (Reuters) - Spanish power utility Endesa ELE.MC posted a lower-than- expected 71% decline in its 2023 net profit on Wednesday, hit by falling demand for energy and lower prices.
Gas and energy prices have fallen sharply from their 2022 peak but demand has so far failed to rebound, hitting companies with significant gas exposure like Endesa.
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The firm, owned by Italian energy giant Enel ENEI.MI, posted a net profit of 742 million euros ($802.92 million), compared with 2.54 billion euros a year earlier and the 1.06 billion euros expected by analysts polled by LSEG.
The amount of natural gas and electricity consumed in Spain has declined for two years in a row, with gas demand falling almost 11% last year.
Weaker demand from residential and industrial customers hit the gas business, Endesa said, as did the $570 million arbitration ruling over a liquefied natural gas contract dispute.
Gas prices around 64% lower led to a sharp fall in energy prices in the Iberian region, where electricity demand also fell. Endesa also blamed regulatory measures including Spain's windfall tax on energy companies for hitting its results.
The results show a weaker-than-expected margin in electricity, and a gas margin that is still negative, RBC analyst Fernando Garcia said.
Rival Spanish power company Naturgy NTGY.MC was also hit by lower gas prices and sales. However, the effects on its bottom line were offset by the expiry of unprofitable hedges that had weighed on its 2022 performance.
Endesa Chief Executive Jose Bogas acknowledged the 2023 decline but was upbeat about the outlook for 2024, confirming annual targets, including an adjusted net profit, used to calculate dividends, of between 1.6 billion euros and 1.7 billion euros.
"After a 2023 affected by extraordinary circumstances, we maintain for the current year a return to the growth path based on the normalization of market conditions," he said.
The company expects "margins in the gas and conventional generation businesses to normalize" and "a very limited impact of the current price environment thanks to our strategy of selling our own production in advance," he said.
($1 = 0.9241 euros)
(Reporting by Pietro Lombardi, editing by Inti Landauro and Miral Fahmy)