CEO_CFO Breakfast_ Increase Grid Investments or Dividend Boost

Summary of Endesa SA (ELE SM) Equity Research Company and Industry Overview - Company: Endesa SA - Industry: Utilities, specifically in the electricity generation, distribution, and sale in Spain, along with involvement in the natural gas sector [9][24] Key Points and Arguments 1. Investment Strategy: Endesa is prepared to increase investments in grid infrastructure if the new allowed return is deemed adequate; otherwise, it will enhance its dividend policy, targeting a 5.6% dividend yield by 2025 [1] 2. Regulatory Developments: A draft regulatory proposal regarding grid investments is expected by December 2024 or January 2025 [1] 3. Electricity Demand Outlook: Management anticipates potential exponential growth in electricity demand over the next three years, despite a historical decline of 0.5% CAGR over the past decade. This is attributed to a surge in grid connection requests [1][2] 4. Connection Requests: In 2023, connection requests in Spain reached 30GW, significantly up from 3GW in 2020. By the end of 2024, there are 50GW awaiting connections, with 20GW already committed for future grants [2] 5. Demand Forecast: The anticipated additional demand could translate to 80-100TWh, compared to the 33TWh forecast by the PNIEC [2] 6. Nuclear Phase-Out: There may be delays in the current phase-out of nuclear plants, as reversing 20% of the current supply could increase CO2 emissions due to reliance on gas plants [1] 7. Tax Uncertainty: The Spanish government has not yet included energy companies in a new tax package, but discussions are ongoing. Endesa's investment plan for 2024-2027 does not account for additional taxes [3] 8. Current Tax Impact: Endesa has been paying approximately €0.2 billion annually from a 1.2% revenue levy over the past two years [3] Additional Important Information - Market Capitalization: Endesa's market cap is approximately €22.0 billion ($24.4 billion) [5] - Price Target and Rating: The current price target is €21.00, with a "Hold" rating indicating a potential return of plus or minus 10% within the next 12 months [5][13] - Recent Performance: The stock has a 52-week high of €20.84 and a low of €15.85 [5] - Investment Risks: Key risks include competition, interest rates, and supply chain issues [10] This summary encapsulates the critical insights from the equity research report on Endesa SA, highlighting the company's strategic direction, market dynamics, and regulatory environment.