INTERNAL ANALYSIS: WEAKNESSES OF ENDESA

INTERNAL ANALYSIS: WEAKNESSES OF ENDESA

• General weaknesses to every electric industry (in this case, Endesa) must take into account at the time to produce:

1. Spain is the country of the European Union with greater regulatory risk in the energy sector.

2. There is a fragmentation of decisions in the electric sector between Government, the autonomous communities and the municipalities.

3. The decrease in production of electrical energy due to the use of renewable energies and coal, and the high cost of the raw material, in this case, of fuel.

4. Difficult storage of the product.

5. investment projects of ENDESA can be not made or can be delayed

• Particular weaknesses that affects Endesa directly are:

1. High indebtedness as bonds: its debt is estimated in 7.663 billion of euros in 2014 due to the divestment of assets in Latin American and the payment of a super-dividend, increasing its debt by 492%. Because of this, the company reduced its equity due to the sale of assets to ENEL. To this we must add that the company had business in the telecommunications sector that led to losses.

2. Political risks: ENDESA will distribute between 2015 and 2016 84,5% of its earnings in dividends without increasing its indebtedness, performing exclusively in cash, and this action would lead to adverse political and economic positions in the countries where ENDESA operates, the imposition of new electrical objectives of the European Union and risks associated with the liberation of the electric sector.

3. Bad image of ENDESA in Spain

4. Bad image and superficial environmental plan in Latin America: t (Ralco dam case on the Biobio River) or HidroAysén project, have led to many social protests.

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