Big fiscal hit from coal pushes Endesa deeper into renewables

The decarbonisation efforts of Spain’s largest utility Endesa are stepping up after its coal-fired power plant assets took a ~€1.87 billion (US$2.07 billion) impairment hit in 2019.

Coal plants have become less competitive due to the higher costs of emissions, a sharp drop in gas prices as well as increased renewable energy production.

This market situation "is causing the company to step up decarbonisation efforts for its electricity generation assets in Spain", Endesa said in a release on Tuesday.

Ahead of its 2019 financial results, the firm had already made two coal-related announcements over the autumn. The firm said last September it would act to shut down imported coal-fired plants in September, followed by its submission last December of an actual request for the closures for both imported and domestic plants. 

In the meantime, the company moved in 2019 to ramp up its investments in renewables by 211%, with roughly 70% of its development investments related to renewables.

In addition, Endesa also became last year the first company to complete all its capacity awarded in Spain’s 2017 state-run power auctions, with 879MW installed. The utility is one of many across Europe that have begun piling into clean energy – particularly solar – in recent years.

Green and digital to outcompete energy transition rivals

If Endesa’s net income in 2019 was crippled by its coal assets, its activity in renewables propped it up elsewhere.

Improved gas business margins and increased investment in renewables through its subsidiary, Enel Green Power España (EGPE), contributed to increased gross margin in the deregulated business, which led to an overall company EBITDA rise of 6%.

The company noted in a release that a net debt/EBITDA ratio of only 1.7x leaves it with plenty of room for substantial investment in renewable energies and digitalisation. Gross investments also went up 50% over the year to €2.2 billion (US$2.38 billion), driven mainly by the clean energy and digitalisation push.

"Endesa will lead the energy transition in Spain, which is why we are making such an enormous effort investing in renewable energies and digitalisation, the keys that will enable us to continue having good results in an increasingly complex market," said Endesa CEO José Bogas. 

"Our portfolio of new renewables projects are now reaching approximately 20,000MW, of which 5,700MW have already been awarded connection points," Bogas added. 

At the end of last year at the COP25 summit in Madrid, Borgas also announced plans to deploy a 1.7GW-plus green energy complex in Andorra, driven mostly by solar PV with wind and energy storage.

Tags: endesa, spain, coal, financial results, 2019 results, energy transition, enel green power, lss2020, largescale2020