Naturgy closed the third quarter of 2022 with sizeable organic investments that have boosted its EBITDA to EUR 3.5 billion to achieve a reported net income of EUR 1.06 billion, in an environment of persistently high volatility in international energy markets and high regulatory uncertainly.
These results up to September incorporate the retroactive effects of the new purchase price agreement reached with Sonatrach last October. They also include the estimated impact of decoupling the final gas sales prices from their current TTF-indexed hedges.
The increase in Naturgy’s results in this period was mainly driven by Energy Marketing and Management activities, with a notable contribution from global operations, representing almost 60% of the EBITDA increase reported. The growth of its activities in Spain generated an EBITDA of EUR 407 million, while global activities were responsible for generating an additional EUR 535 million.
During the first nine months of the year, investments grew by 26%, reaching EUR 2.6 billion since the publication of the 2021-2025 Strategic Plan, to enhance its industrial competitiveness within the framework of its commitment to the energy transition. Therefore, of the total invested in the 2021-2022 period, more than 65% was allocated to the growth and development of industrial activity in networks and renewables.
Despite the complex macro, energy and regulatory environments, Naturgy is maintaining its investment commitment made in the Strategic Plan, which foresees EUR 14 billion earmarked for organic development until the end of the period, mainly destined for the development of its gas and electricity distribution networks, renewable power generation and the development of renewable gases.
“Our commitment to investments within the framework of the company’s strategic plan is solid and is supported by all our reference shareholders. We want to be a main player in the evolution of the sector towards a realistic energy transition that is compatible with our environment. Despite the volatility and uncertainties, Naturgy remains committed to standing shoulder to shoulder with its stakeholders, from citizens to shareholders, working towards solutions and actions that have added value in this turbulent environment”, explained Naturgy’s Chairman & CEO, Francisco Reynes.
Boosting the energy transition and the industrial plan
Naturgy remains committed to its strategy of developing a renewable portfolio, and already has more than 5.4 GW of operational power from renewables, of which nearly 1GW has come into operation since September of this year.
In Spain, the company is engaged in the construction of some thirty wind farms and photovoltaic plants, representing the incorporation of nearly 1 GW of new power into the Spanish renewable park over the coming months.
In Australia, a priority country for Naturgy, the group aspires to reach an installed capacity of 2.2 GW in 2025, with an investment of close to EUR 2 billion focused on the development of wind, photovoltaic and energy storage system technology plants.
In the area of offshore wind, last April Naturgy reached an agreement with the Norwegian company Equinor for the analysis and development of offshore projects in Spain to take advantage of their additional capacities for the development of this technology, which provides great potential for the country The two companies are already working on the joint development of the Floating Offshore Wind Canarias (FOWCA) project, via which they want to install more than 200 MW of floating offshore wind power in the maritime area of eastern Gran Canaria, where Spain’s first offshore wind auction will take place next year.
The company is also leading renewable gas development in Spain as one of the central tenets of decarbonisation in the short and medium terms. According to data from the European Commission, Spain is the third country with the most potential to develop biogas in Europe, with a capacity to reach a power output of 137 TWh per year. These figures, combined with the other renewable gases, could manage to cover 57% of the total demand for gas in the medium term. Likewise, and with the right incentives, the country could be producing 20Twh of biomethane by 2030.
Naturgy is currently working on hydrogen and biomethane projects worth EUR 4 billion, with a view to reaching 10% biomethane, in line with the latest EU guidelines on increasing Europe’s energy independence. Through the group’s gas distributor in Spain, the company now has a portfolio of projects to connect biomethane plants to its distribution networks, which will mean the injection of around 6 TWh a year.
The company’s natural gas distribution activity in Spain, which it carries out through its subsidiary Nedgia, includes more than 5.4 million supply points, which account for 70% of consumers. Its main assets are the more than 55,500 kilometres of networks that enable the safe and efficient supply of natural gas and renewable gas (biomethane), as well as hydrogen in the future. Nedgia operates in 11 autonomous communities and 1,150 towns.
For its part, UFD, the group’s electricity distributor, serves more than 3.8 million supply points via a network of 114,000 kilometres of high-, medium- and low-voltage power lines. The company’s ongoing focus is on its investments in this business to prioritise innovation and the digitisation of distribution networks as a fundamental element for the energy transition towards a decarbonised model.
Net debt, dividend and guidance for 2022
The net debt on 30 September stood at EUR 1.025 billion. This data does not reflect the relevant cash outflows expected in the last quarter, including the redemption of the hybrid bond and the retroactive payment associated with the recently concluded revision of the price of gas with Sonatrach.
In light of the current market evolution forecasts, the company expects to close the 2022 financial year with a leverage in line with the previous financial year. Last October, the rating agencies S&P and Fitch both confirmed the group’s rating at the BBB level.
In this environment, the company has also published its best estimate of gross operating profit (EBITDA) for the current year 2022, which has been estimated at around EUR 4.8 billion, without including new tax figures that must be registered in the current year.
Naturgy also clarified that the company’s current financial hedges in derivatives did not require financial guarantees.
In line with the commitments made under the 2021-2025 Strategic Plan, the Board of Directors has approved the second interim dividend for the 2022 financial year of €0.40/share, which will be paid exclusively in cash on 18 November. This dividend is the same as the one paid out the previous financial year.
Regulated gas market. Last Resort Plan [Tarifa de Último Recurso – TUR]
Naturgy is the leading company in the regulated gas tariff offer with close to 1.2 million customers and a market share of almost 77%, illustrative of its commitment to consumers to help them pay the most competitive price for their energy.
Following recent government measures, the company has lately reinforced customer service means to attend to consumers interested in the Last Resort Plan (TUR) for gas. Once again, Naturgy wants to stand shoulder to shoulder with its customers and contribute to reducing the cost of their energy bills.
It has therefore expanded its telephone customer service to deal with the surge in requests from domestic customers for information and for contracting TURs. In fact, it has currently multiplied by 12 the number of operators exclusively assigned to taking these calls, in addition to reinforcing customer service in the supply company’s web channel and in the more than 150 face-to-face stores throughout Spain. The company has plans to continue expanding its telephone service in the coming weeks.
It is currently managing an average of more than 5,000 daily contacts through the three service channels solely for contracting this tariff. To date, and since the implementation of the new government measures, the company has managed nearly 63,000 new requests for contracting the TUR tariff.
Commitment to society and its employees
Against this backdrop, Naturgy has remained committed to its customers and society through various initiatives to help offset, as far as possible, the impact of rising energy prices in industrial and domestic activity in Spain.
To this end, last October, the company launched a new Industrial Commitment, aimed at large consumers with a stable 2-year offer, which is currently being marketed. This is the latest of the company’s commitment initiatives launched since the end of 2021.
Naturgy was pioneer in launching its Electricity Commitment initiative at €65/MWh for three years, aimed at offsetting the effects of the price of the electricity pool. More than 600,000 customers have been able to protect themselves from price volatility with this initiative. Later, in March 2022, Naturgy led the field again with its launch of the Industrial Gas Commitment initiative, aimed at its industrial gas customers, with a fixed price of €55/MWh.
All these offers are clear indications that Naturgy puts the customer first and that its ideas are customer-focused, demonstrating its commitment and transparency in the current context.
Likewise, the company remains firmly committed to the professional development of its employees, promoting the rejuvenation of the workforce and providing the tools necessary for their progress.
Naturgy is committed to managing and transforming the company’s talent and moving towards a balanced workforce in terms of gender and age, in both managerial and technical positions. As part of this commitment, the company launched the Flex&Lead programme, aimed at outsourcing young talent with diverse profiles, with the aim of recruiting 300 young people by 2025. To date, 150 people have already been incorporated, of which 78% are women.
Similarly, with the aim of developing internal talent, there is the company’s Internal Lead programme, aimed at enhancing the managerial skills of technical profiles in the medium term. Over 180 of the company’s professionals, 66% of them women, are already taking part in this programme.
Environmental commitment
The energy transition is recognised as a major opportunity for Naturgy. An example of this is the company’s commitment to achieve carbon neutrality by 2050 at the latest, reducing total greenhouse gas emissions, Scope 1, 2 and 3, in accordance with the Paris Agreement’s 1.5ºC – 2ºC pathways, and under the principles of a just transition.
In its commitment to the fight against climate change, the company aims to restore natural capital and biodiversity through multiple initiatives, all of them aligned with the prevention, reduction and compensation of its impacts to make progress in the commitment not to lose net biodiversity and the enhancement of the value of natural environments.
A total of 302 biodiversity initiatives were developed at an international level in 2021 alone, 25% of them voluntary, in addition to environmental restoration actions on 635 hectares, of which 29% correspond to protected spaces, habitats and species.