The General Shareholders’ Meeting of Naturgy approves the company’s management and points out its progress made in sustainability, social responsibility and corporate governance issues
- The company held a General Shareholders’ Meeting completely online for the first time due to the State of Emergency caused by the health crisis.
- The shareholders of the company approved the annual accounts for the 2019 year and supported the good performance in its businesses in the financial year in spite of an adverse energy context and a complex macroeconomic environment, aggravated subsequently by the worldwide health crisis.
- In 2019, Naturgy launched a series of management initiatives that led to a reduction in its risk profile, the progress made in its efficiency plan standing out. It has allowed the company to be able to face the situation with greater flexibility and decisiveness.
- Naturgy announced to its shareholders that a Sustainability Committee would be created, composed of five members, which would supervise the company’s progress and role in the energy transition along with all its environmental, health and safety and social responsibility indicators.
- The company also stated the priority management lines for 2020 focussed, among others, on strengthening its liquidity and using the review mechanisms included in the gas supply agreements to adapt them to the new market situation.
- The General Shareholders’ Meeting approved a total cash dividend of €1.37/share charged to the financial results of 2019, 5% higher than in 2018. In this second quarter of 2020, the company will pay a supplementary dividend of €0.01/share.
- The General Shareholders’ Meeting ratified the appointment of Lucy Chadwick and Isabel Estapé as new proprietary directors at the proposal of GIP and Criteria, respectively; hence progress was made towards parity on its Board of Directors. It was also agreed to reappoint Helena Herrero as independent director and the directors Marcelino Armenter and Rajaram Rao as directors, along with ratification of Javier de Jaime’s post as proprietary director.
- The company reinforced its executive structure by setting up three executive business units. The new appointments, Mr. Pedro Larrea, Mr. Jorge Barredo and Mr. Carlos Vecino, will be at the head of these three units and will reinforce the current team in order to deal with the new challenges related to energy and to seek new growth opportunities.
The executive chairman of Naturgy, Francisco Reynés, presided over the company’s Ordinary General Shareholders’ Meeting, which was held today in Madrid fully online for the first time due to the extension of the State of Emergency. The shareholders approved the company’s results, along with its corporate management report for the financial year 2019.
The General Shareholders’ Meeting also approved a total dividend of €1.37/share charged to the 2019 results (more than 5% higher than in 2018). The company already paid out €0.29 of the total dividend in July 2019, €0.47 in November 2019 and €0.593 in March 2020. The shareholders approved payment of €0.01/share as a supplementary dividend, pending from the original proposal (€0.603/share), which will be paid out on the 3rd of June 2020.
The General Shareholders’ Meeting also approved a capital reduction to take place before 30 July 2020 by buying back up to 21,465,000 of treasury shares within the share buy-back programme that began in July 2019. At the end of the first quarter of the financial year 2020, the company agreed to temporarily suspend such treasury share buy-back programme until there was greater visibility about how long the crisis caused by COVID-19 would last and how serious it would be.
“In 2019 we fulfilled the commitments set out in our road map in spite of the adverse energy situation and unfavourable macroeconomic environment: we are more efficient, we reduced our risk profile, carried out the planned disinvestments, maintained financial discipline and, most importantly, we are still committed to being a key player in the energy transition, making progress towards a more sustainable energy mix”, explained Naturgy’s chairman, Francisco Reynés.
The General Shareholders’ Meeting was attended virtually by more than 2,000 people and reached a quorum of 75%.
Fulfilling the Strategic Plan
The company has practically completed the first stage of its Strategic Plan, becoming more flexible and active thanks to implementing an organisational culture change with more simple structures, transparency in its functioning and accountability. The non-core processes have also been improved and businesses with no critical mass have been disinvested. During this first period of the Strategic Plan, Naturgy focussed on investments aligned with the energy transition and has continued to apply its investment policy, placing a priority on profitability over size.
The targets for the second stage of the Strategic Plan are, among others, to continue reducing the risk profile by means of assets rotation, in line with the energy transition targets, establishing win-win relationships with the regulatory authorities and renegotiating the gas supply agreements.
Other targets set by Naturgy for the second stage of the Strategic Plan are improvement and automation of core processes and strengthening the company’s position, focussed on the financial structure and progress in the ESG commitments, among others.
“It is crucial for the company to adapt its organisation to the new challenges and to focus on customer satisfaction as required steps to make progress in the new situations”, stressed the chairman of Naturgy.
The company hence faces a volatile situation in the second part of the Strategic Plan, with uncertainty on the international markets and a significant reduction in the prices of raw materials, all of which are due to the health crisis caused by COVID-19. The energy industry suffered during the first part of the year an overall drop of all the indices (HH -33%, JKM -63%, NBP -64% and the Spanish electricity pool with -41%) and there are also negative GDP forecasts for all the main geographical areas in which the company operates.
Due to the current situation and the serious uncertainties in the context due to COVID-19, the company already moved forward with some of its priority management lines for 2020 at the beginning of April, focussed, among others, on maintaining sturdy liquidity, a secure balance sheet position along with flexibility and making use of the ordinary and extraordinary review mechanisms included in the gas supply agreements to adapt them to the current market conditions.
Naturgy will also speed up its transformation plan to improve efficiency, flexibility and allocation of resources due to the new situation and will continue analysing growth opportunities and assets rotation that will contribute to improving the company’s risk profile and creating value. In addition, Naturgy will work on increasing its weight in the electricity sector, in particular in renewable energy generation, in order to consolidate its leading role in the energy transition.
“For all these reasons, the financial year 2020 will be challenging and we do not plan on facing it without making progress in our transformation. This change implies, now more than ever, an increasingly competitive and demanding situation. We have almost reached the halfway point in the Strategic Plan having fulfilled all our commitments but there are many things still to be done”, stated Francisco Reynés.
In this transformation, the company is making significant progress in ESG (Environmental, Social and Governance) in order to “create long-term sustainable value for all of our stakeholders and to strengthen our company, always respecting the environment. We will continue reinforcing our commitment to health and safety as well as to our Corporate Responsibility Policy”, explained the chairman.
Therefore, the shareholders were informed that a Sustainability Committee would be set up, which will be responsible for monitoring and supervising the company’s role in the energy transition and for reinforcing the Board’s commitment to this matter. This Committee will be in addition to the Appointment, Remuneration and Corporate Governance Committee and the Audit and Control Committee.
The directors on this new Committee are: Ms. Helena Herrero (chairwoman), Ms. Lucy Chadwick, Ms. Isabel Estapé, Mr. Claudi Santiago and Mr. José Antonio Torre de Silva.
By approving this new Committee, Naturgy aims to reinforce the work that it has already been carrying out related to sustainability with the aim of maintaining its leading position as a responsible, trustworthy, integral, transparent company committed to its stakeholders.
The duties of the Sustainability Committee will include, among others, the regular analysis of the environmental, health and safety and social responsibility indicators as well as the expectations of the company’s different stakeholders and the preparation of action reports and proposals, within its scope, to be submitted for the consideration of the Board of Directors.
Mr. Reynés explained to the shareholders the environmental improvements that the company achieved in 2019 along with the new Global Policy and Plan on this matter, which includes Naturgy’s action lines until 2022. In 2019, the company reduced its CO2 emissions by 16%, the use of water in its activities by 24%, generated 70% less waste and doubled the use of recycled materials, among other achievements.
Transformation for the immediate future. Organisational changes.
“We are faced with a highly uncertain and increasingly volatile situation that requires companies must conduct a general review and seek ways to adapt to the new conditions. Naturgy must accelerate a new and deeper conversion stage that will allow it to continue consolidating the structural reforms undertaken and, at the same time, enabling it to face the challenges of the near future”, stated Mr. Reynés.
As explained by Naturgy’s chairman, this need for greater transformation is based on two main focal points. On the one hand, competitiveness, in which the company will continue operating under strict efficiency, profitability and financial parameters, and, on the other hand, organisation, by activating the teams and business portfolio. “Our obligation to you is to adapt our organisation to the challenges we detect in order to be able to face them with the greatest guarantees for success”, stated Mr. Reynés to the shareholders.
Therefore, as of this second quarter, the company will define a new executive structure after setting up three new business units to tackle the new energy challenges and seek new opportunities for growth, which will be managed by three executives with proven experience in this matter.
The Energy and Grid Management Unit, managed by Pedro Larrea, will work on adapting and improving the traditional business by means of proactive regulatory management, profitable grid growth, the identification and implementation of the best practices and adapting the energy and supply management to flexible and liquid markets.
The Renewable Energy, Innovation and New Business Unit, managed by Jorge Barredo, will aim to find opportunities related to the energy transition by promoting innovation, exploring new future business models and increasing the company’s renewable energy business to become the leader in the company’s target markets.
The Retail Marketing Unit, managed by Carlos Vecino, the duties of which will be to differentiate customer marketing models by customers as a response to a more competitive and complex environment, focussing on incorporating new technologies and developing the brand's potential.
Larrea, Barredo and Vecino are professionals with long careers in the sector at an international level and proven experience. This talent will be added to the members of the teams already set up by Naturgy that have led to it achieving such an important position in the international energy sector over the last few years.
Major milestones in 2019
At the General Shareholders’ Meeting, the company’s chairman explained Naturgy’s main activity milestones in 2019, among which he pointed out the significant investment of €1.7 billion in the financial year, mainly in growth projects, with historic investment in the case of renewable energy (about 800 MW); and the modernisation of the gas and electricity distribution grids.
He also explained that the company continues working on activating its activity portfolio and improving its profile through possible disinvestments in the geographic areas that do not provide the company with any added value.
As corporate milestones, throughout 2019, Naturgy has continued improving its business portfolio, closing the acquisition of 34.05% in Medgaz and Blackrock’s Global Energy & Power Infrastructure Fund (GEPIF) becoming a participant in the Medgaz gas pipeline, by purchasing a stake of 50% in the Special Purpose Vehicle (SPV) that was set up when agreeing on the acquisition of Mubadala’s stake in such infrastructure and at the same price. Naturgy does not need to contribute cash to the global transaction; it will hence maintain its liquidity and its financial stake will result in a strategic co-control position with Sonatrach.
The chairman also considered the efficiency plan is developing well. In this respect, the financial year 2019 ended with accumulated cost savings of €380 million, a much higher figure than the targets originally included in the Strategic Plan. Mr. Reynés repeated to the shareholders that the company is in a position during 2020 to fulfil the commitments planned for 2022 on this matter (€500 million).
Changes in the share value
The growing profitability of Naturgy’s value in the financial year 2019 was pointed out at the General Shareholders’ Meeting (higher than 6%), even though the performance of the share value has been affected by various exogenous factors, among which Francisco Reynés mainly highlighted the outbreak of the global pandemic and its impact on the price of commodities in this financial year as well as the proposal by the Spanish Market and Competition Commission (CNMC) in mid-2019 of regulatory remuneration for the gas distribution activity in Spain.
The chairman highlighted the company’s efforts in 2019 to manage the regulatory forecasts and stated that “we will adapt our growth plans to ensure that the new investments we undertake are reasonably remunerated and that they reach the minimum acceptable profitability in the long term”.
Political instability in Latin America, in particular in Chile and Argentina, and an energy situation there that is continually deteriorating, with greater reductions in the third quarter of 2019 and high uncoupling of prices at an international level, were another two of the relevant factors causing the irregular performance of the share value in the financial year.
“We firmly believe that in the long term the price of our shares will reflect the progress made by the company and we accept responsibility for decisively preparing for the future challenges. At Naturgy, we do not manage the company based on the market price of the shares in the short term”, he explained to the shareholders.
Changes taking place in the Board of Directors
The General Shareholders’ Meeting approved the appointment of Lucy Chadwick and Isabel Estapé as new proprietary directors representing GIP and Criteria, respectively. Naturgy is hence making progress in achieving parity on the Board of Directors by appointing two new directors to its top management body. Specifically, Ms. Estapé and Ms. Chadwick will be members on the Audit and Control Committee and the Sustainability Committee and the proportion and weight of female members on the Board of Directors will be increased, Helena Herrero already being an independent director.
Naturgy is moving decisively towards achieving parity with these appointments, as it is aware of the need to increase the number of female members on the company’s decision-making bodies and that “in a company with a background of more than 175 years, these challenges must be handled firmly and realistically”, explained Mr. Reynés.
Similarly, the General Shareholders’ Meeting approved the reappointment of Helena Herrero Starkie, as independent director, ratification of Rioja S.à.r.l.’s appointment as proprietary director (represented by Javier de Jaime) and Marcelino Armenter and Rajaram Rao were reappointed as proprietary directors representing Criteria and GIP, respectively.
The General Shareholders’ Meeting also approved the Remuneration Policy for the directors of Naturgy for the period 2020-2022. As of this financial year, the directors who are members on any of the committees will receive their remuneration depending on their attendance at the meetings thereof. The company also agreed on a cap for the directors’ annual remuneration.
Naturgy’s measures against COVID-19
The company has efficiently, decisively and promptly responded with different measures to provide the required resources for its employees to work from home and to provide all the personal protection equipment for the employees who must continue travelling from their homes to deal with urgent situations or to go to critical centres. About 75% of the staff have been working from home since the beginning of the crisis.
The company has increased the resources used at all of its critical facilities that guarantee the power supply and has met all the health and safety requirements for its employees.
At the same time, Naturgy has adopted numerous measures to support its customers, families, suppliers and society in general, offering financial and social coverage to a group of more than 10 million people in Spain. The employees and the Board of Directors, along with the company, have donated €2.3 million to the Cruz Roja Responde (The Red Cross Responds) programme to purchase health equipment.
Naturgy has been proactive and has made progress in designing and activating a plan for easing restrictions and returning to work after the COVID-19 crisis, which will always be executed by prioritising its employees’ health and safety at all times and complying with the guidelines provided by the health authorities.
“One of our priorities is to protect our employees. We would like to acknowledge their effort in adapting to this situation and the commitment of all of them at this time”, Francisco Reynés pointed out.
Pedro Larrea, Energy and Grid Management Unit
Pedro Larrea is a Mining Engineer from the Polytechnic University of Madrid and MBA from INSEAD. He has a long professional career in a wide range of industrial sectors. He has experience in the energy sector managing key aspects such as regulation, commodity management, supplies, or new energy management models. Larrea has been CEO of companies in the energy sector in Latin America and has developed his professional career in, among others, Endesa, PricewaterhouseCoopers, FerroAtlántica and most recently FerroGlobe, as CEO in the United Kingdom.
Jorge Barredo, Renewable Energy, Innovation and New Business Unit
Jorge Barredo is a Naval Engineer from the Polytechnic University of Madrid. He was the founder in 2005 of an engineering dedicated to the photovoltaic market, which in 2008 became Gestamp Solar, connecting the first photovoltaic panels in Spain and beginning its international expansion. After the entry of investment funds, it was renamed X Elio and Barredo was named CEO in 2015 and later, in 2019, chairman of that company. Since 2012 he has been president of the photovoltaic energy association UNEF.
Carlos Vecino, Retail Marketing Unit
Carlos Vecino is a Telecommunications Engineer from the Polytechnic University of Madrid and Executive MBA from IESE. Since 2013 he has been a founding partner and CEO of República Móvil, developing new and disruptive customer relationship channels. Vecino has wide experience as head of sales and marketing at Vodafone for a decade. Previously, he worked in consulting, leading management projects in Europe, mainly in the areas of Strategy, Finance, Commercial / Marketing, Technology and Operations.
Madrid, 26 May 2020