Endesa has reported a net profit of €1.04bn ($1.20bn) for the first half of the year, up 30% compared to last year, according to results released on July 29. This increase comes amid rising electricity demand and a surge in connection requests, as the company adjusts its strategic focus toward power network development.
Networks take priority amid rising demand
Majority-owned by the Italian group Enel, Endesa has scaled back its investments in renewables to allocate more resources to upgrading its distribution infrastructure. This strategic shift follows the major outage on April 28, which affected Spain and Portugal and reignited debate over the resilience of the national electricity system.
Investment and regulation of the networks fall under the remit of the Comisión Nacional de los Mercados y la Competencia (CNMC), Spain’s competition and energy regulator. The CNMC is considering updating the grid remuneration framework as early as next year, including raising the guaranteed rate of return to 6.46%.
Concerns over the CNMC proposal
Endesa has criticised the proposal, arguing it would not enable the national plan’s objectives for electricity and network investment to be achieved. Chief Executive Officer Jose Bogas stated that “this proposal seriously jeopardises the level of investment needed to meet growing demand and the country’s ambitions”.
For the reporting period, Endesa posted a net profit higher than the previous year, when it stood at €800mn, a period marked by a one-off tax on energy companies. The group confirmed it remains on track to meet its annual targets.
Electricity margin under pressure in second quarter
According to financial analyst Fernando Garcia, the company saw erosion in its integrated electricity margin during the second quarter, as well as a decline in gas unit margins, although these remained high. He anticipates that the downward trend in gas margins will continue in the second half of the year.
The issue of incentives for grid investment remains central for the sector as demand and supply security come under increased scrutiny.
