Endesa reports 30% increase in profits but warns that Spain's grid plans lack incentives

Spanish power utility Endesa announced on Tuesday that its net profit for the first half of this year rose by 30% to 1,04 billion euros ($1.20billion). However, it warned that a proposed framework to reward power grid investment in Spain does not offer sufficient incentives.

Enel, the majority owner of the company, has focused on upgrading and expanding power networks in response to the soaring demand for electricity and requests for connection, while reducing its spending on renewables.

The massive blackout that affected Spain and Portugal on April 28, has reignited the discussion about the need for investment in the country's electricity networks. These are regulated by Spain’s competition and energy regulator CNMC.

The company has criticised a proposal from Spain's Competition and Energy Watchdog CNMC, which proposes updating the remuneration structure for grid investments next year. This includes raising the guaranteed return of investments in power grids up to 6.46%.

Jose Bogas, the chief executive of the company, said that the proposal "seriously jeopardises" the level investment Spain requires to reach its goals for decarbonisation, increased electricity demand, and grid investment, which are included in the climate and energy plan.

Endesa recorded a net income of 1,04 billion euros in this period. The results were 800 million euros higher a year ago, which included a windfall-tax on energy companies.

The company has said that it is on target to reach its goals this year.

In a note, RBC analyst Fernando Garcia stated that "Endesa's integrated electricity margins" had declined in the second quarter, "and its gas unit margins were lower, though still high."

He said, "We expect gas unit margins to decline in the second half. It is now harder to beat guidance."

(source: Reuters)