Today, Naturgy presented to the market its results for 2022, a year marked by intense volatility and global uncertainty, as well as a sustained increase in the cost of raw materials worldwide and a good performance of the liberalised activities in the different markets.
In this context, the company registered an EBITDA of 4.954 billion euros (+40%) and a reported net profit of 1.649 billion euros (+35%). In the period, regulated activities recorded a good performance, with an increase in EBITDA to 2.475 billion, due in part to the normalisation of operating costs in Spain in the wake of the optimisation plans and the positive impact of the exchange rate in Latin America, among other factors.
For its part, deregulated business improved its contribution to the Group’s EBITDA to 2.574 billion euros, driven by marketing activity in Spain and global energy management.
“The 2022 financial year was marked by the extreme volatility of the international energy market and by geopolitical tensions that have made the year one of the most disparate and unique in recent times. In this context, the company has intensified its activity to provide the system with stability and security of supply, and has paid special attention to ensuring the best conditions for citizens and companies in terms of access to energy despite uncertainty, as demonstrated by our Gas and Electricity Commitment Initiatives, to name just one, designed to streamline and automate our clients’ changeover to the regulated tariff”, explained Naturgy’s Chairman & CEO, Francisco Reynés.
Context and milestones of the period
The company’s results come in an atypical year, with an unprecedented energy scenario marked by significant fluctuations in international markets and prices in world indexes, such as the case of the Dutch TTF with oscillations between €65 and €319/MWh throughout the period.
Spanish and European regulation has also intensified, with the common objective of decoupling international gas prices with respect to electricity and reducing volatility. In 2022, the energy sector added more than twenty new legislative and regulatory items to its activity.
In this context, the company has played a key role in the energy system itself and with all its customers, alongside a very significant increase in investments to strengthen the role of distribution networks and renewable energies in the process of transition of the economies in which it operates.
Naturgy made a decisive contribution to the supply of gas for Spanish supply security. During the year, the company imported more than 30% of the total natural gas that reached Spain. In the specific case of liquefied natural gas, Spain imported 318 TWh in 2022, of which 29% was brought in by Naturgy.
In its key role in guaranteeing support for and the operation of the Spanish energy system, the company registered a very significant increase in the production of electricity using gas turbines. This technology represented more than 25% of total electricity production in Spain in 2022, compared to 15% in 2021 due, among other factors, to the low hydraulicity of the period and the high energy exports to France.
Against this backdrop, Naturgy has remained committed to its customers, society and business network through various initiatives to help offset, as far as possible, the impact of rising energy prices in industrial and domestic activity in Spain. More than 60% of the company’s customer base has been able to benefit from long-term pricing initiatives launched by Naturgy in 2022.
Likewise, in 2022 the company has facilitated and streamlined the transfer of its customers to the Regulated Gas Tariff to ensure that they could enjoy the cheapest price currently on the market, with an average of 4,000 customers per day transferring to the last resort plans.
Naturgy results
The year 2022 was marked by the aforementioned volatility of the international markets, with an upward trend in the cost of raw materials which had a particular impact on international LNG activities. The good performance of the liberalised activities has boosted the net income.
The networks business in Spain grew, boosted by electricity distribution activity and the completion of the adaptation plan, which in part offset the fall in gas distribution activity owing to a drop in demand for gas and the negative impact of a steady decline in the remuneration of gas distribution under the 2021-2026 regulatory framework.
Results from the networks business in Latin America have been boosted by the upward tariff trend in those countries where the company operates, as well as an upward trend in the exchange rate.
The liberalised activities registered an EBITDA of 2.574 billion euros, marked by sales in international markets and marketing activity. Renewable business also registered positive growth, discounting the unexpected impact of the hydraulic canon in Spain in the 2021 financial year.
Net debt fell by almost 7% to 12.07 billion euros, supported by the generation of cash flow, the management of working capital and exchange rate trends.
Regarding shareholder remuneration, at the General Meeting the Board of Directors will propose a complementary dividend of 0.50 euros/share, which will be added to the first and second interim dividend of 2022 of 0.30 euros and 0.40 euros per share respectively, paid in cash during the year. The total remuneration to the shareholder from the 2022 results will therefore be 1.2 euros/share, as stated in Naturgy’s Strategic Plan 21-25. The pay-out ratio will be 70%.
Investments and global renewable development
During the 2022 financial year, the company invested a total of 1.907 billion euros, almost 30% more than in the same period the previous year. The distribution networks and renewable energy activity represented more than 90% of all the investment earmarked for growth (close to 1.2 billion euros). The destination of the investments confirms Naturgy’s commitment to making progress in the energy transition, since almost 70% of those made are eligible, according to the taxonomy defined by the European Union in 2021. The company is working to accelerate its investment programme in the coming years, building on its strong cash flow generation and strong balance sheet.
Naturgy is also continuing to reinforce its commitment to the deployment of renewable technologies in all the countries in which it has a presence, with special emphasis on territories with stability in terms of regulations and currency. At the end of 2022, the company recorded more than 5.5 GW of operating power in Spain, with thirty wind farms and photovoltaic plants under construction, equivalent to more than 1GW of additional capacity, and expected to start operating in the coming months.
Naturgy recently received a favourable Environmental Impact Statement (EIS) for 18 wind and photovoltaic projects, jointly representing over 1.3 GW of power. The environmental green light for these developments allows the power company to strengthen its commitment to the energy transition and continue to progress in its decarbonisation strategy. Among the projects with positive environmental authorisation, the eight wind farms in Galicia and the photovoltaic Campo de Arañuelo (300 MW) in Extremadura, which will be the largest solar installation built by the company in Spain, stand out.
One of Naturgy’s priority renewable development countries is Australia, where the group aims to reach an installed capacity of 2.2 GW of wind, photovoltaic and storage technology by 2025. Recently, Naturgy has successfully connected its first battery storage facility in the world to the grid, a historical milestone for the company in the renewables business. The project, ACT Battery, will reinforce supply quality to the city of Canberra and accelerate the energy transition in the country by allowing for greater penetration of renewable energy in the grid.
The company also has a strong commitment to the analysis and development of offshore wind technology in Spain. In April 2022, Naturgy reached an agreement with the Norwegian company Equinor for the development of offshore projects in Spain, including the joint development of the Floating Offshore Wind Canarias (FOWCA) project, consisting in more than 200 MW of floating offshore wind power in the east of Gran Canaria.
Naturgy is a leader in the development of renewable gas in Spain as today’s fundamental, current and realistic line of action for decarbonisation in the short and medium terms. Naturgy is currently working on hydrogen and biomethane projects, with the aim of increasing the injection of renewable gas into its distribution networks.
The European Union has already set new, more ambitious targets to reach a production of 35 billion m3 in 2030, in addition to the percentage of replacement of natural gas in gas consumption, together with support mechanisms that promote its deployment in Europe. Spain has huge potential for the production of this green gas with 163 TWh per year, equivalent to 45% of the national demand for natural gas in the country, an associated investment of 40.5 billion euros and the generation of 62,000 jobs. according to a recent study by Sedigas.
International scenario and trends in raw materials
Changes in raw material prices have followed a more consistent global trend in all regions, with an unprecedented increase in raw material prices in both the gas and electricity markets that has been further aggravated by the conflict between Russia and Ukraine, impacting the main international indexes.
Brent prices were 43% higher than in 2021, while gas prices in the main hubs showed unprecedented increases (TTF multiplied by 3.4 and JKM by 2.3) compared to the previous year. On average, wholesale electricity prices multiplied by 1.5, exceeding all-time highs. In Spain, these increases led to significant regulatory change and uncertainty, including the effects from and application of a temporary regulatory ceiling on gas prices in Spain and its impact on the electricity pool.
Ongoing commitment to society
Over 60% of the company’s customer base are benefitting from the long-term pricing initiatives launched by Naturgy in 2022.
Naturgy became a pioneer in September 2021 when it launched its Electricity Commitment initiative at 65 €/MWh for three years, aimed at offsetting the effects stemming from the price of the electricity pool. This was when the company started to offer its full inframarginal power generation capacity at a fixed price. More than 600,000 customers have been able to protect themselves from price volatility through this Naturgy initiative.
Subsequently, in March 2022, , Naturgy led the way once again and launched its Industrial Gas Commitment initiative. With this tariff, it offered a stable and competitive price to its industrial gas customers within the current energy scenario at a fixed price of 55 €/MWh to the end of 2025, far below current TTF-pegged prices in the European gas markets. It also offered commitment initiatives to Communities of Neighbours and small industry and commerce with fixed prices for two years.
Naturgy is the leader in the supply of gas at the regulated tariff in Spain, with approximately 1.3 million customers and a market share of around 75%. At the end of 2022, the company intensified its actions to help customers in the current energy context, with various initiatives aimed at facilitating their transfer to the last resort plan rate at a current cost lower than the market’s. In 2022, the company managed the changeover of more than 230,000 customers to the regulated tariff. This figure exceeds that of all the registrations registered in TUR in the years 2019, 2020 and 2021.
All these offers clearly demonstrate that Naturgy puts the customer first and that its ideas are customer-focused, to demonstrate its commitment and transparency in the current situation.
ESG Solid progress
In line with its commitment to the energy transition and decarbonisation, the company registered a 24% decrease in its total, direct and indirect emissions in 2022, decoupling the increase in financial results from the evolution of the company’s carbon footprint. In terms of the environment, Naturgy also implemented close to 350 biodiversity initiatives to contribute to the preservation of natural capital in the regions of the world in which it has a presence.
In terms of governance, the group continues to advance gender parity and women’s representation. 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 joined the company, of which 78% are women.
Naturgy closed 2022 with a global distributed economic value derived from its own activity and that carried out with suppliers, of 32.09 billion euros, which represents 42.8% more than in the 2021 financial year.