Naturgy posts ordinary EBITDA of 2.18 million euros

  • The accounts filed by the company include the possible impact from the recent sentence imposed on the Chilean company Metrogas (in which Naturgy holds a 55.6% stake), a ruling that will be appealed. The most cautious estimate of that impact on consolidated net profit for Naturgy stands at 126 million euros.
  • The first half of the year closed with an ordinary EBITDA of 2.18 million euros (up 11% on 2021) and a reported EBITDA of 2.05 million euros. The ordinary net profit stood at 717 million euros, while the reported net profit stood at 557 million euros after including the provision for Metrogas.
  • Naturgy invested a total of 721 million euros during the period, an increase of 64% on 2021. The investments were mainly used to develop gas and electricity networks, as well as new renewable projects.
  • The company is maintaining its strategy to develop a portfolio of renewable generation projects. Naturgy currently has over 5.3 GW of installed capacity in operation.
  • Net debt stood below 12 billion euros (down 7% on December 2021) at 30 June, supported by the generation of cash flow and exchange rate trends.
  • In line with the commitments made under the 2021-2025 Strategic Plan, the Board of Directors has approved the first interim dividend for the 2022 financial year at 0.3 €/share, which will be paid on 18 August.

Earlier today and as it announced to the market, Naturgy presented its first semester results after examining the possible effects stemming from the recent first instance ruling received by the Chilean company Metrogas (in which Naturgy holds a 55.6% stake). The Naturgy Board of Directors has decided to apply the highest level of caution to its accounting while Metrogas appeals the court ruling.

Metrogas received a sentence on a series of demands filed by TGN (Argentinian transport company) dating back to 2009 alleging contractual non-compliance in the transport of Argentinian gas when Argentina stopped supplying gas to Chile during the Argentinian gas crisis. In light of this ruling, the group has incorporated the possible impact as an extraordinary provision in its accounts for the first semester. Last week, Metrogas announced that it will take every step to defend its interests by lodging an appeal against the court decision.

Regardless of any legal remedies that may be undertaken, a decision has been taken to adopt the highest level of accounting caution by providing for the maximum amount that estimates reflect might need to be paid under the first instance ruling. The gross amount would be 312 million euros and covers both the claim for payment of certain invoices and the early termination of the contract, as well as the accompanying interest payments. Considering the 55.6% stake held by Naturgy in Metrogasthe impact on net profit stands at 126 million euros.

Within a scenario of the utmost volatility, the accounts presented earlier today show a first semester reported EBITDA of 2.05 billion euros and a reported net profit of 557 million euros. In turn, the ordinary EBITDA for the first semester stood at 2.18 million euros (up 11%), mainly due to good performance by the wholesale gas industry worldwide. The ordinary net profit for the group stood at 717 million euros, an increase of 28%.

“In these first six months of the year, we have witnessed the extreme volatility being experienced by the international energy market and our goal is to keep working to provide the general public and businesses with the best conditions for access to energy in this current climate of uncertainty, as demonstrated by our Gas and Electricity Commitment initiatives, for example”, explained the Chairman & CEO of Naturgy, Francisco Reynés.

Performance in the semester

The first six months of the year have been characterised by intense volatility in the world’s energy markets, with an upward price trend being seen in all international markets that has especially affected the international LNG industry. 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 networks business remained stable in Spain, although growth in the electricity distribution networks business offset the fall in gas distribution business owing to a drop in demand for gas and the negative impact from a steady decline in the remuneration of gas distribution under the 2021-2026 regulatory framework.

During the period, Naturgy increased the amount allocated to investments by 64% to a total of 721 million euros. These investments were especially focused on the renewable business in Spain, Australia and Latin America, as well as on gas and electricity distribution networks in Spain and Latin America.

In terms of the 2021 financial year-end, net debt fell by almost 7% to 11.98 billion euros. This was supported by the generation of cash flow, the management of working capital and exchange rate trends.

In line with the commitments made under the 2021-2025 Strategic Plan, the Board of Directors has approved the first interim dividend for the 2022 financial year at 0.3 €/share (the same figure as last year), which will be paid out on 18 August.

The Board continues to monitor progress of all analyses of the Géminis Project, which so far confirm its strategic suitability. However, the current market volatility, trends in the energy industry as a whole and the numerous regulatory uncertainties on which precise information is still lacking recommend adapting the implementation schedule to events as they unfold.

Combined cycle power plants and supply guarantee

Growth was posted by thermal power generation due to higher production levels. Combined-cycle power plants confirmed their key role in support of the Spanish energy system, which was affected by the closure of coal-powered plants, low rates of hydro-power and irregular performance by photovoltaic power generation due to the weather conditions. These combined-cycle power plants have guaranteed coverage of electricity demand during the months of June and July, coinciding with the high temperatures and extreme levels of demand for electricity.

To 30 June, the combined-cycle power plants accounted for over 116 TWh of the total demand for electricity in mainland Spain and were the main pillar of the system. In recent weeks and at certain hours of the day, more than 80% of demand in the Spanish electricity system was met by thermal power generation technologies (combined-cycle power plants with gas turbines and nuclear power generation), which means that close on four out of five consumers would have had no electricity without the availability of these technologies.

In turn, renewable generation posted a higher EBITDA than in the same period last year, reflecting the new capacity that entered operation. The company is maintaining its strategy to develop a renewable portfolio and currently has over 5.3 GW of installed capacity in operation.

The company also increased its installed capacity worldwide during the first half of the year, especially in Spain and Chile. Naturgy expects to close the year with an increase in its installed capacity of 500 MW and to continue its growth in renewable energies in 2023 with an additional 1,500 MW of installed capacity worldwide.

In Australia, the company has various projects at several stage of development that will enable it to increase its total installed capacity in the country by some 1,000 MW over the coming years. Naturgy is also maintaining its growth plan in the United States and has begun construction of its first photovoltaic power plant in the country, where it will develop 3.2 GW of solar and 2 GW of storage over the coming years.

In the field of marine wind power, Naturgy reached an agreement in April with the Norwegian company Equinor to analyse and develop offshore projects in Spain and to harness its complementary capabilities for the development of this technology with great potential in the country.

International scenario and trends in raw materials

The first six months of 2022 have witnessed unequal demand trends in the regions where Naturgy operates, with declines in Spain, Brazil and Mexico, where the price elasticity of demand for energy commodities is beginning to be felt. This situation reflects the various macro-economic situations, climate circumstances and energy trends in countries where the group operates.

In the semester, electricity and gas demand remained below pre-pandemic levels. Similarly, the average demand from gas distribution business in Mexico and Brazil was lower when compared with the same period of the previous year. In turn, the demand for gas and electricity in the other Latin American businesses posted modest growth.

During the first six months of the year, Latin American currencies experienced limited change vis-à-vis the Euro in comparison with the first half of 2021. When combined with the positive trend in the American Dollar, this had a positive impact on financial performance by the group.

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. The price of Brent is 66% higher than it was in the same period last year, while gas prices rose to unprecedented levels (NBP in particular, the price of which rose almost three-fold).

In turn, wholesale electricity prices climbed to an all-time high with a 350% increase in the Spanish market or pool. 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.

Permanent commitment to society

Against this backdrop, Naturgy has maintained its commitment to its customers and society through various initiatives to help offset the impact from rising energy prices on industrial and domestic activity in Spain as far as is possible.

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 from the price of the electricitypoolThe company offered its full inframarginal electricity generation capacity at a fixed price. More than 600,000 customers have protected 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.
All these offers clearly show that Naturgy puts the customer first and that its ideas are customer-focused, to demonstrate its commitment and transparency in the current situation.

Furthermore, and as part of its commitment to lead the energy transition, the company has increased its offer from Naturgy Solar in order to encourage self-supply in all market segments. This is an integrated solution aimed at private customers, residents’ associations, SMEs and large companies that includes the design, management and processing of permits and grants, as well as payment facilities.

Renewable gases, decarbonisation vector

The company is maintaining its commitment to the development of new energies that will enable the country to harness the quality of and investments made in the existing gas supply networks. It is therefore working with a portfolio of projects to connect biomethane power plants to its networks that will represent an injection of close on 6 TWh/year, leading the development in Spain of renewable gas as one of the short- and medium-term decarbonisation vectors.

In addition, it has hydrogen and biomethane projects worth four billion euros aimed at reaching a 10% share for biomethane in the gas mix, in line with the latest European instructions to increase energy independence in Europe.

In this regard, the company began operating a new plant in Catalonia that will be the third brought into commercial operation by Naturgy in Spain and will inject close on 12 GWh/year of biomethane into the Spanish gas distribution network as of 2023.

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 generation potential of 137 TWh per year. Combined with the other renewable gases, this potential could eventually meet more than 50% of total gas demand in 2028. Furthermore, and with the right incentives, the country could be producing 20 TWh of biomethane in 2030, which would represent 8% of conventional natural gas demand (industrial and residential).