Naturgy’s results up to September show recovery, although they fall short of the pre-pandemic levels of 2019
Naturgy reaffirms its social commitment and offers its domestic, SME and industrial customers a fixed electricity price of 65 euros/MWh for three years that will enable them to disconnect from the pool
- Naturgy reported EBITDA of 2.56 billion euros up to September, in line with last year, 17% below 2019, and not yet back to pre-pandemic levels. Ordinary EBITDA was 2.99 billion. Net profit up to September amounted to 777 million euros, including 187 million euros of net capital gains from the divestment of the electricity businesses in Chile and UFG in Egypt.
- Up to September, the company experienced a recovery in demand, as well as a slight expansion in its gas margins in international markets, which was temporary due to the volatility of these markets. These effects have been offset by further downward pressure on electricity supply margins due to higher electricity pool prices in Spain.
- The company’s balance sheet has been strengthened, with net debt in September of €11.4 billion, 16% lower than at the close of 2020. Investments amounted to 900 million euros, mainly focused on the renewable generation and energy distribution network infrastructure businesses.
- The high volatility of international markets and the uncertainty associated with possible regulatory changes make it impossible to extrapolate the third quarter results to the rest of the year. In any case, the company expects to close the year with ordinary EBITDA of between 3.8 and 3.9 billion euros.
- Naturgy announced today that it will offer all of its available infra-marginal electricity generation capacity to its residential, commercial and industrial customers at an energy price of €65/MWh for three years. With this initiative, Naturgy continues to demonstrate commitment and seeks to help avoid the consequences of high pool prices.
- Regarding the security of gas supply in Algeria, Naturgy confirms that the capacity expansion of the Medgaz pipeline (co-managed by Sonatrach and Naturgy) will be operational by the end of this year, which will enable it to continue to provide its customers with competitive gas. The end of the GME (Maghreb-Europe gas pipeline) concession will therefore not affect security of supply.
- The company will pay its second interim dividend of 0.40 euros/share on 15 November, as scheduled in its 21-25 Strategic Plan. A total dividend of 1.20 euros/share was set for the full year 2021.
- Naturgy is making progress in fulfilling its roadmap set out in its 21-25 Plan, which provides for investments of 14 billion to promote its role in the energy transition and decarbonisation. In a context of profound transformation of the sector, the Plan approved unanimously by the Board of Directors in July envisages reaching an EBITDA of 4.8 billion by 2025. The Plan was positively assessed by the rating agency S&P, which upgraded its outlook to stable.
- On 14 October, the CNMV officially announced the result of the unsolicited partial takeover bid of IFM at 22.07 euros/share, which concluded with an acceptance of 10.83% of the capital. The share price closed yesterday at 23.12 euros per share.
Results up to September that fall short of 2019 levels
Naturgy closed the third quarter of 2021 with a positive performance of its businesses and faces a year end marked by volatility in international gas markets and regulatory uncertainty. EBITDA reported in the period was 2.56 billion, in line with the results for the same period in 2020 and 17% lower than in 2019, without recovering pre-pandemic levels. Ordinary EBITDA was 2.99 billion, 6% higher than in 2020 and 6% lower than in 2019.
By business area, 40% of EBITDA corresponds to Spanish networks, 20% to Latam networks, 25% to Energy Management, 8% to Marketing, and 7% to Renewables.
As for the net profit reported at the end of September, the company recorded 777 million euros, which includes net capital gains of 187 million euros, generated by the divestments of the electricity business in Chile and the stake in UFGas in Egypt.
Despite the volatility of the international energy context, the company expects to close 2021 with an EBITDA of between 3.8 and 3.9 billion euros.
Up to September, the company experienced a recovery in demand and a slight expansion in its gas margins in its international markets, which was temporary due to the volatility of these markets. These effects have been offset by downward pressure on electricity supply margins due to higher electricity pool prices in Spain.
The company’s balance sheet has been strengthened, with net debt at September of 11.4 billion euros, 16% lower than at the end of 2020. Investments amounted to 900 million euros, mainly focused on the renewable generation and energy distribution network infrastructure businesses.
Last July, the company presented its 2021-25 Strategic Plan, unanimously approved by its Board of Directors, with which it will promote its role in the energy transition and decarbonisation. Naturgy thus established the main lines of industrial and financial action for the coming years in an energy context of profound transformation. The Plan envisages estimated investments of 14 billion euros and sets an EBITDA of 4.8 billion euros in 2025. In the words of Naturgy Chairman and CEO, Francisco Reynés: “At Naturgy, we are committed to the challenges of the energy transition, and to this end we have an ambitious Strategic Plan backed by all our shareholders.”
As set out in the Strategic Plan, the company will pay a second interim dividend of 0.40 euros/share on 15 November, payable in full in cash, thus fulfilling its commitment to shareholder remuneration. “Our company has always been transparent and has always delivered for its shareholders. We have announced the payment of the second interim dividend as set out in our roadmap,” said Reynés.
Volatile energy situation
The increase in electricity prices in Spain in recent months has been at the forefront of the recent public agenda, and more specifically the concern of industrial and domestic consumers. In this line, Naturgy positively values the Government’s decision regarding the exclusion of reduction of fixed price and term electricity contracts. This helps to provide stability and visibility to generators and consumers, and especially to industrial customers potentially affected by the regulatory uncertainties of recent weeks. Government clarifications maintain incentives for forward contracting as a strategy to mitigate the current volatility of the pool.
With regard to the gas market in Spain, the company expects non-discriminatory tax treatment with respect to electricity for all its customers, thereby maintaining territorial balance and avoiding discrimination in autonomous communities in colder areas with higher energy consumption.
Under-marginal electricity generation at a fixed price for three years
Faced with the rise in electricity pool prices, and ahead of the measures of the Government and the rest of the sector, Naturgy announced last September a first initiative to reduce the impact of rising electricity prices on domestic consumers.
Recently, the company has taken a new step, announcing that it will offer all its available infra-marginal electricity generation capacity to its customers (residential, commercial and industrial) at an energy price of 65 euros/MWh for three years. With this measure, Naturgy will allow its customers to decouple their bills from the volatility of the pool price, demonstrating its commitment and social sensitivity in the long term.
The president of Naturgy, Francisco Reynés, stressed that “once again, as we did during the toughest stage of the pandemic, we have launched a measure to respond to an exceptional situation. This initiative aims to reassure our customers, establishing an accessible and stable price, regardless of the volatility of the pool, which we hope will be well received by the industry, an essential sector for the recovery and economic development of our country.”
Guaranteed gas supply for Naturgy customers
The end of the concession of the GME (Maghreb-Europe) gas pipeline on 31 October had been foreseen for some time and will not affect the supply of gas for Naturgy, which had already taken this scenario into account and adapted its supply strategy accordingly.
The supply through the Medgaz pipeline—an infrastructure co-controlled by Naturgy and Sonatrach—is assured thanks to the ongoing expansion that will be operational by the end of this year with a capacity of more than 10 billion m3 per year. The gas supplied by this pipeline is intended exclusively to supply our gas customers in Spain, including residential, commercial and industrial customers.
“The extension of Medgaz reinforces the security of supply of Algerian natural gas to our country, and is an essential element for the coming winter months. Medgaz is for us, and our partner Sonatrach, an example of good cooperation in the management of a strategic infrastructure for Spain,” said the Chairman and CEO of Naturgy.
Other relevant milestones of the period
Momentum in management has been key during this period, as evidenced by the entry into new markets with strong currencies through clean technologies, as well as the success of the last renewable auction in Spain and the promotion of new renewable gas projects.
In this regard, last October Naturgy won the award of 221 MW of photovoltaic power in the last auction of renewable energy in Spain. In this regard, the company is making progress in its commitment to renewable energies and is taking firm steps to promote the energy transition, moving towards a more sustainable mix.
In addition, in this third quarter, Naturgy completed the closing of the agreement for the sale of its 96.04% stake in the Chilean subsidiary of electricity networks, CGE, to the Asian group State Grid Development Limited for a total purchase price of 2.57 billion euros.
On 14 October, the National Securities Market Commission (CNMV), officially announced that 10.8% of the company’s capital had participated in the partial and unsolicited takeover bid launched by IFM at a price of 22.07 euros per share. The shareholder structure as of 14 October was as follows: Criteria 26.7%, GIP 20.6%, CVC 20.7%, IFM 10.8%, Sonatrach 4.1% and free float 17.1%.
Progress in ESG
It should also be noted that the company has made good progress towards fulfilling its ESG (Environmental, Social and Good Governance) commitments. During the third quarter, it recorded a decrease in greenhouse gas emissions of around 12% as a result of higher renewable production during the period.
On the other hand, the company has increased its net emission-free production by 14% and emission-free installed capacity by 15%, thanks to the entry of new renewable capacity in operation in Chile.
Madrid, 10 November 2021