Sales Revenues and EBITDA by Business
Sales Revenues and EBITDA
  2005 2004 % change
(in millions of euros) IAS/IFRS IAS/IFRS  
Core Business      
Electric Power Operations
Sales revenues 4.993 4.304 16.0%
EBITDA 1.006 1.205 (16.5%)
as a % of sales revenues 20.1% 28.0%  
Hydrocarbons Operations      
Sales revenues 3.303 2.231 48.1%
EBITDA 353 335 5.3%
as a % of sales revenues 10.7% 15.0%  
Corporate Activities      
Sales revenues 42 62 (32.3%)
EBITDA (76) (89) 14.6%
as a % of sales revenues n.m. n.m.  
Eliminations
Sales revenues (1,940) (1.253)  
EBITDA - -  
Total core business      
Sales revenues 6.398 5.344 19.7%
EBITDA 1.283 1.451 (11.6%)
as a % of sales revenues 20.1% 27.2%  
       
Other Operations      
Continuing Operations      
Water      
Sales revenues 31 27 14,8%
EBITDA 8 4 100%
as a % of sales revenues 25.8% 14.8%  
Engeneering (*)      
Sales revenues 221 256 n.a.
EBITDA 15 20 n.a.
as a % of sales revenues 6.8% 7.8%  
Eliminations      
Sales revenues - - -
EBITDA - - -
Total other operations -   -
Sales revenues 252 283 (11.0%)
EBITDA 23 24 (4.2%)
as a % of sales revenues 9.1% 8.5%  
       
Edison Group      
Sales revenues 6.650 5.627 18.2%
EBITDA 1.306 1.475 (11.5%)
as a % of sales revenues 19.6% 26.2%  
(*) The data for full year 2005 reflect the amounts for the first half of the year.
Performance and Results of the Group
Operating Performance
Core Businesses
The operating and financial results for the first half of 2005 and those for the period used for comparison purposes have been computed in accordance with the International Financial Reporting Standards (IAS/IFRS), which, among other issues, required the proportional consolidation of Edipower at 50% and the interruption of the amortization of goodwill, now subject to a yearly impairment test.
During 2005, sales revenues were up significantly (+19.7%) compared with the previous year, thanks to positive performances by both the hydrocarbons operations (+48.1% including intra-Group transactions) and the electric power operations (+16.0%).
These gains were made possible by the combined impact of increased sales volumes and higher prices. The hydrocarbons operations reported a sharp rise in unit sales of natural gas (+19.5%, net of intra-Group transactions), due mainly to higher demand from residential users, while in the electric power area, volumes improved by 4.3%, due mainly to growing demand from customers in the deregulated market. At the same time, a favorable trend in the benchmark oil market drove prices higher in both areas of business compared with the previous year.
However, EBITDA declined by about 168 million euros (-11.6%), falling from 1,451 million euros in 2004 to 1,283 million euros in 2005. This decrease, which was in line with expectations, was due to external factors: specifically, for the electric power operations, the expiration of the CIP-6 incentives for some of the Group's power plants (about 160 million euros), the shutdowns of other power plants for scheduled and extraordinary maintenance, and a decrease in hydroelectric output caused by a reduction in the availability of water resources, and for the hydrocarbons operations, the charges recognized (about 20 million euros) to reflect the cost of using strategic reserves during the periods of unusually intense cold in the first three months of 2005.
Overall, the unfavorable divergence that occurred in 2005 between rising fuel prices and procurement costs in general and the trend of market prices, which reflected these cost increases only in part, was more than offset by the skillful management of the Group's portfolio of energy assets, an increase in unit sales, an effective hedging strategy in the commodities market and the positive performance of the hydrocarbons production operations.
For the reasons explained above, EBIT, which under the new reporting standards no longer include a charge for the amortization of goodwill and include the depreciation and amortization due to the consolidation of Edipower, decreased to 630 million euros, down from 797 million euros in 2004.
Other Operations
Engineering – On July 20, 2005, Edison Spa signed a contract to sell 100% of the Tecnimont Spa shares it held to Maire Holding Spa. The sale closed on October 25, 2005. As required by IFRS 5, Tecnimont's revenues and expenses for the first half of 2005 are reflected on a line-by-line basis in the consolidated income statement, while the profit for the third quarter of the year (the company was deconsolidated as of October 1, 2005) is shown in the income statement under Profit (Loss) from discontinuing operations.
Water – The water operations ended 2005 with EBITDA of 8 million euros, up from 4 million euros in 2004.