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    NTGY   ES0116870314

NATURGY ENERGY GROUP, S.A.

(NTGY)
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Naturgy Energy S A : improves its net income thanks to its ability to adapt

04/28/2021 | 10:30am EDT
Naturgy improves its net income thanks to its ability to adapt
  • Ordinary net income for the period was 323 million euros, an increase of 3.5%, while ordinary ebitda stood at 1.029 billion, a 2% decrease.
  • The company recorded solid results in its electricity and gas networks business in Spain during the first quarter, and saw continued growth in its renewable power generation capacity in territories with a strong currency. The depreciation of Latin American currencies continued to have a negative impact on results in this territory.
  • The company made progress in the ESG area and highlights include a 23% decrease in greenhouse gas emissions and a more than 14% increase in emissions-free installed capacity around the world.
  • In March, Naturgy, ENI and Egypt finalised an agreement to amicably settle disputes that had been affecting Unión Fenosa Gas (UFG) since 2012. By finalising this agreement, Naturgy demonstrated its ability to simplify its business portfolio, reduce risk, and to maximise long-term value creation.
  • In the first quarter, the company also continued to make progress in its commitment to renewable energy in both Spain and abroad. In January, it acquired a portfolio of renewable energy projects at an early stage of development in the United States for 8,000 MW of solar energy and 4,000 MW of storage. Naturgy was also one of the main winning bidders in the auction held by the Government of Spain.
  • As a result of its commitment to energy transition and recovery, Naturgy has identified investment opportunities for a value of almost 14 billion euros in one hundred projects to be developed over the next few years under the Next Generation programme, and those related to renewable gas, hydrogen and biomethane are particularly noteworthy.
  • In the first quarter, IFM launched a partial takeover bid for 22.6% of Naturgy's capital at a share value of €22.3. The bid is subject to governmental approval and subsequent processing by the CNMV (Spanish Stock Exchange Commission).


Naturgy closed the first quarter of 2021 having made significant progress in its commitments to long-term value creation for all its stakeholders and in reducing its risk profile. The company continued to actively manage all its businesses during the period, ended the conflict with Egypt that had dragged on since 2012 and took decisive steps towards concluding the sale of its electricity distribution business in Chile, forecast for the second quarter of this year. Naturgy also kept its finger on the pulse to improve its position in the international renewable energy market; January saw it conclude it operations to enter the US market by purchasing a portfolio of projects at an early stage of development.

Franciso Reyes, chairman of Naturgy, underscored 'the company's capacity to achieve results and create value on a daily basis despite the context. Our activity establishes us as an active agent in the energy transition process that aims to contribute to economy recovery, in line with our commitment to society. Naturgy is deeply involved in a profound transformation, one that is needed in the current environment and that forces us to pre-empt the challenges faced by the sector.'

It should also be noted that the company has made good progress towards fulfilling its ESG (Environmental, Social and Good Governance) commitments. During the first quarter it recorded a decrease in greenhouse gas emissions, which fell by almost 23% as a result of greater renewable energy production and reduced thermal production during the period.

The company also increased its net emissions-free production by 21% and its emissions-free installed capacity by over 14%, partly due to new renewable capacity being put into operation in Chile and the effects of closing carbon power plants during the comparative period.

Dynamic management in the first quarter

A dynamic approach to management has been key during the first quarter and is demonstrated by the company's entry into new markets with strong currencies via clean technology, its successful bidding at the most recent renewable energy auction in Spain and the progress made in various different operations.

In March, Naturgy, ENI and the Arab Republic of Egypt finalised the agreement reached on 1 December 2020 to amicably resolve litigation related to Unión Fenosa Gas (UFG). The agreement valued all of UFG at 1.5 billion dollars, of which 1.2 billion correspond to its Egyptian assets (including pending legal procedures) and the remaining 300 million dollars to assets outside of Egypt.

Naturgy has already received part of the payments in cash to a sum of approximately 600 million dollars, and most of the assets outside of Egypt, excluding UFG's commercial activities in Spain. As part of the agreement, Naturgy terminated its gas procurement contract, which ended in 2029, while maintaining the contract it has with Oman that expires in 2025. It is significant step towards reducing the company's exposure to gas purchase price risk and resolved a complex situation that had dragged on since 2012.

By bringing this transition to a close, Naturgy exits Egypt and ends its joint business with ENI, demonstrating its ability to simplify and reduce the risk of its commercial position to maximise long-term value creation.

Naturgy also made progress towards finalising the sales agreement of its 96.04% share in Chilean electricity network subsidiary CGE to Asian group State Grid Development Limited for 2.570 billion euros. On 31 March 2021, the National Economic Prosecuter's Office (FNE) in Chile unconditionally approved the merger. Naturgy predicts it will complete the transaction in the second quarter of 2021.

The company continued to position itself in the international market with investments that add medium and long-term value to its stakeholders. As part of this strategy, it purchased a portfolio of 8 GW (solar energy) and around 5 GW (storage) projects in the United States.

Naturgy plans to have operating power of 1.6 GW by 2025 while keeping open the possibility of developing its remaining projects to reach 8 GW of photovoltaic energy by 2030. This transaction is Naturgy's first investment into the US renewable energy market and demonstrates its commitment to growth in renewable energy with a focus on stable territories and projects at an early stage of development.

In Spain, Naturgy was the winning bidder of 235 MW (38 MW of wind power and 197 MW of photovoltaic energy) at the most recent auction in Spain. The award at this auction completes Naturgy's commercial strategy, which primarily aims to agree long-term renewable energy purchase agreements (PPAs) with industrial customers. Naturgy also won a bid for 45 MW of solar capacity in the Canary Islands, which means the group can double its current installed capacity in the islands.

In terms of recovery plans driven by the European Union and Government of Spain, the company has submitted around one hundred seed projects in response to the EU's call for expressions of interest. These energy transition projects identify investment opportunities valued at nearly 14 billion euros.

During the first quarter, IFM launched a partial takeover bid for 22.6% of Naturgy's share capital at a share price of 23 euros that was subsequently adjusted for dividends to 22.37 euros. This bid remains open and subject to governmental approval.

Results

Despite an improving economic context and gradually recovering raw material prices, Covid-19 has continued to have a negative impact on operating behaviour which is visible in macroeconomic uncertainty and the significant depreciation of Latin American currencies. In response, Naturgy is immersed in launching transformation initiatives that will help it recover its competitiveness despite these energy-related and macroeconomic challenges. These initiatives are being developed in a context where it is now possible to glimpse signs of improvement.

Ordinary ebitda stood at 1.029 billion euros in the first quarter of 2021, a 2% decrease on the previous year, despite the fact that the Covid-19 outbreak began at the end of February 2020 and therefore had a limited impact during the first quarter of 2020. Ordinary net income reached 323 million euros in the first quarter, a 3.5% increase. Reported net income reached 383 million euros and this result was principally achieved by finalising the UFG agreement, which had an extraordinary positive impact of 65 million euros in earnings.

The company's reported ebitda (982 million euros) and reported net income (383 million euros) were above the consensus forecasts, which predicted a reported ebitda of 943 million euros and a reported net income of 300 million euros.

Total investment during the first quarter rose to 196 million euros, a 2.5% decrease due to greater maintenance optimisation and the impact of currency fluctuations.

At 31 March 2021, net debt rose to 13.597 billion euros, in line with net debt at the close of 2020. This debt still doesn't reflect the pre-tax income of 2.570 billion euros forecast for the sale of CGE.

Evolution of raw materials

The start of 2021 has been marked by signs of improved economic forecasts, mainly due to the launch of various Covid-19 vaccination campaigns that are being unfurled around the world and are making uneven progress, depending on the speed of each territory.

These signs of improvement go hand in hand with increased inflation predictions and a gradual recovery of global raw material prices. Brent prices have increased by an average of 21% compared to the same period last year, while gas prices have also improved at the main hubs (HH and NBP rose by 29% and 84% respectively during the first quarter of 2021 compared to 2020). Wholesale electricity prices also rose and the Spanish pool increased by 30% compared to the first quarter of 2020.




Key figures



Contribution to EBITDA per activity



Madrid, 28 de abril de 2021

Disclaimer

Naturgy Energy Group SA published this content on 28 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2021 14:29:01 UTC.


© Publicnow 2021
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Sales 2021 17 691 M 20 856 M 20 856 M
Net income 2021 1 332 M 1 571 M 1 571 M
Net Debt 2021 11 638 M 13 720 M 13 720 M
P/E ratio 2021 16,3x
Yield 2021 6,69%
Capitalization 21 621 M 25 536 M 25 489 M
EV / Sales 2021 1,88x
EV / Sales 2022 1,85x
Nbr of Employees 8 372
Free-Float 27,7%
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Mean consensus HOLD
Number of Analysts 19
Last Close Price 22,50 €
Average target price 22,03 €
Spread / Average Target -2,10%
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Managers and Directors
Francisco Miguel Reynés Massanet Chairman & Chief Executive Officer
Carlos Javier Álvarez Fernández Chief Financial Officer
Ramón Adell Ramón Independent Director
Francisco Belil Creixell Independent Director
Helena Herrero Starkie Independent Director
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