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    NTGY   ES0116870314

NATURGY ENERGY GROUP, S.A.

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Naturgy Energy S A : presents its strategic plan for the period to 2025 with investments of 14 billion to strengthen its role in the energy transition

07/28/2021 | 11:36am EDT
Naturgy presents its strategic plan for the period to 2025 with investments of 14 billion to strengthen its role in the energy transition
  • Naturgy has today presented its strategic plan. It comes after the company has resolved many of the uncertainties in the current environment, closed on the sale of its Chilean electricity operations and confirmed the start of recovery in its results.
  • The five-year plan was a matter of urgency for the company given the demands of the financial markets and taking into account a complex 2020 hampered by the pandemic and the obvious need for a roadmap, which is mandatory for a company of its size and complexity.
  • The company plans to invest 14 billion euros by 2025, of which approximately two-thirds will be earmarked towards boosting renewable generation, confirming the company's shift in strategy and its commitment to the energy transition. The group's renewable generation capacity will be increased from the approximately 5 GW in operation today to more than 14 GW, expected to be in operation by December 2025.
  • The second area of investment will be gas and electricity grids, mainly in Spain. The remainder will be allocated to maintaining existing assets and enhancing the company's commercial positioning model.
  • The new plan pursues ambitious profitability targets, setting an EBITDA of 4.8 billion euros by 2025, as well as an ordinary net profit of 1.6 billion euros. It also confirms that the company's rating is set at a floor of BBB according to S&P criteria.
  • The new plan places special emphasis on ESG commitments, with a progressive reduction in CO2 emissions, gender parity and linking aspects of remuneration to meeting environmental and social targets.
  • In addition to its commitment to investment 14 billion euros, Naturgy has highlighted a potential additional amount of 13.8 billion euros to be invested in projects associated with the EU's Next Generation plan.
  • The company gives more visibility to its dividend policy to 2025, setting a floor of 1.2 euros per share per year, representing an average pay-out for the period of 85%. The company will review the evolution of the policy's execution in 2023.
  • Naturgy is approaching this new stage with the aim of boosting its industrial growth while maintaining financial discipline and taking advantage of the opportunities arising from the energy transition; and to become a best-in-class operator through the digitalisation of its processes.


Naturgy has today presented to the market its Strategic Plan for the 2021-2025 period, in which the company will strengthen its role in the energy transition and decarbonisation. Through this plan, Naturgy has set out the main lines of industrial and financial action for the coming years in an energy contextof profound transformation and after a year marked by a macroeconomic crisis that has greatly impacted the sector.

During the presentation, the company's senior management detailed the maintargets for 2025: to achieve an EBITDA of 4.8 billion euros, net profit of 1.6 billion euros and investments estimated at 14 billion euros for the period. These will be mainly earmarked for renewable projects in early stages of development and in stable geographies; for networks, with a prominent role given to digitalisation and stable regulation; and for new businesses, such as renewable gas, hydrogen and distributed generation.

According to Reynés, 'We are all committed to meeting the main targets. We want to join in the transition and we believe that this plan is ambitious, but also realistic and executable. We must seize the opportunity to contribute to the transformation of the sector with drive and solvency. Spain is strategically well placed to tackle the transition with reasonable assurance, for which a stable regulatory framework is vital.'

The entire Strategic Plan is part of the strong commitment to ESG that the company has been implementing in recent years. In keeping, this roadmap includes a Sustainability Plan with solid targets for 2025 in the environmental, social and governance areas.

The strategic lines include the objective of zeroemissions by 2050 and close to 60% of installed power from renewable sources. The company also expects to achieve gender parity by 2030 and to have more than 40% of its executive and management positions occupied by women by 2025. Furthermore, Naturgy will increase the weighting of ESG compliance in the remuneration of management teams.

This ongoing commitment achieved a milestone a few years ago when Naturgy was one of the first Spanish companies to create a Sustainability Committee within the Board of Directors entrusted with monitoring compliance with ESG-related objectives and challenges.

Despite the adverse context, Naturgy has met the main targets it set in 2018 in its previous Strategic Plan, which focused on simplicity and accountability, capital discipline, optimisation and shareholder remuneration. 'We are ready for a new stage of transformation. Naturgy has demonstrated its ability to achieve results and create value in its businesses on a daily basis. Our position is to accelerate our transformation and anticipate the many challenges ahead of us as a society, industry and country,' Reynés said.

Investments and business profile

Naturgy plans to invest 14 billion euros over the next 5 years, of which about 80% will be eligible according to the European taxonomy of sustainable finance. By business area, 60% of these investments will be in renewables and new businesses, 30% in grids, and the remainder in energy management and marketing.

The company will dedicate part of the investments to increase digitalisation and electrification, and to significantly boost the implementation of renewable gas to enhance its key role in the energy transition. Hydrogen, mobility, storage and distributed generation will be other focuses of investment in the coming years.

Investment of 8.7 billion euros, 60% of the total forecast for the period will be allocated to growth in renewables. The focus of this growth strategy will be attractive countries with stable regulation and strong currencies, as well as projects in early stages of development that contribute to the transition.

Naturgy wants to triple its installed renewable capacity from the current 4.6GW to 14GW internationally by 2025. Of this target, the highest growth will be in Europe (+5.2GW), followed by Australia (+2.2GW) and other geographies such as the United States and Chile.

On the whole, investment in renewables internationally and in Spain will average of 1.73 billion euros a year to increase the EBITDA of this business to 1 billion euros by 2025 (+22.4%).

Grids in Spain and Latin America will represent an investment for the period of over 4 billion euros, 30% of the total. The company estimates an EBITDA of 2.7 billion euros for this business by the end of the period of the new Strategic Plan.

As regards electricity grids in Spain, Naturgy is committed to becoming a leading operator thanks to the optimisation, automation and digitalisation of processes, while with regard to gas grids, the company aims to enhance the transition of the network in order to contribute to decarbonisation and commercial repositioning. In this respect, the company estimates that it will be able to inject more than 1TWh of renewable gas into Spain's gas transmission system by 2025. Currently, 95% of the gas pipelines of Naturgy's distribution company are already adapted to renewable gas and hydrogen.

Furthermore, the company will continue working to review its supply contracts and explore alternatives that generate value for some of its activities, such as thermal generation in Spain and Latin America or the international LNG business.

In relation to marketing, Naturgy's roadmap envisages investments of more than 700 million euros within the period with the aim of repositioning the company's services, improving analytics and the digitalisation of systems, and boosting competitiveness in the market to strengthen customer relations.

In addition to the 2021-2025 Strategic Plan, the company has presented close to onehundred projects aimed at energy transition under the European Union's economic recovery plan. These projects identify investment opportunities worth 13.8 billion euros and include Spain's main hydrogen plant in La Robla (León), renewable developments in Meirama (Galicia) and other renewable gas projects in Catalonia, Castile and León, and Asturias, among other regions.

Financial targets and remuneration policy

Naturgy's Strategic Plan sets a target EBITDA of 4.8 billion euros and net profit of 1.6 billion euros by 2025.

The main financial strategic lines will focus on maintaining a floor rating of BBB (according to S&P). With regards to the company's dividend policy, more visibility has been given to this until 2025, with a floor set at 1.2 euros per share per year. The company will review the evolution of the policy's execution in 2023.


Madrid, 28 July, 2021

Disclaimer

Naturgy Energy Group SA published this content on 28 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2021 15:33:27 UTC.


© Publicnow 2021
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Financials
Sales 2021 17 633 M 20 673 M 20 673 M
Net income 2021 1 285 M 1 507 M 1 507 M
Net Debt 2021 11 944 M 14 003 M 14 003 M
P/E ratio 2021 16,3x
Yield 2021 5,56%
Capitalization 20 747 M 24 353 M 24 323 M
EV / Sales 2021 1,85x
EV / Sales 2022 1,80x
Nbr of Employees 8 552
Free-Float 27,7%
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Mean consensus HOLD
Number of Analysts 17
Last Close Price 21,59 €
Average target price 22,03 €
Spread / Average Target 2,05%
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Managers and Directors
Francisco Miguel Reynés Massanet Chairman & Chief Executive Officer
Carlos Ayuso Salinas Director-Internal Audit, Compliance & Control
Ramón Adell Ramón Independent Director
Francisco Belil Creixell Independent Director
Helena Herrero Starkie Independent Director
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