2024-07-15 17:54:27 ET
Summary
- Endesa is reducing its exposure to thermal generation sources as part of a pan-European trend by utilities.
- Declines in thermal production have impacted EBITDA, while margins have also been affected by ongoing declines in electricity prices.
- Large nuclear provisions and the impending nuclear phaseout in Spain make Endesa's valuation unattractive for investment relative to other Iberian utility picks.
- We like EDP better.
Endesa ( ELEZF )( ELEZY ) is continuing to reduce its exposure to thermal generation sources, which is consistent with a pan-European effort by utilities to do so. Remaining thermal exposure is quite limited at this point, but the declines YoY have had a meaningful impact on overall production, affecting EBITDA. Moreover, margins have been damaged by the ongoing YoY declines in electricity prices, which we mentioned in our last coverage . Ultimately, while some might be excited by the relatively depressed price action and want to take action, particularly as headline multiples of around 6x EV/EBITDA seem compelling, we would stay away due to large nuclear provisions, with nuclear phaseout in Spain likely to happen with no extensions expected in 2027. The cost to Endesa will be around half of its current market cap....
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Endesa: Thermal Generation Cuts Hitting Incomes