Engie Cuts Losses to $420mn. Savings Ahead of Plan
French energy giant Engie cut its net loss to €400mn ($420mn) in 2016, down from €4.6bn in 2015, it said March 2, while achieving a result that was in line with its guidance, and said its cost reduction scheme is ahead of target. Its results again this year included multi-billion euro impairment provisions.
Engie (known as GDF Suez until two years ago) benefited from the positive impact of the restart of the Doel 3, Tihange 2 and Doel 1 nuclear power plants in Belgium in December 2015, the first effects of the “Lean 2018” performance program, a positive temperature effect in France, and the commissioning of assets. However, these positive impacts only partially offset the continued negative price effects, and the unfavourable foreign exchange impact, notably on the Norwegian krone, Brazilian real and pound sterling, it said.
On its home turf in France, gas and power sales volumes rose but it found competition stiff in the business gas sector. Among the achievements were renegotiated contracts with both Norway's Statoil and Russia's Gazprom to lower the price, but it suggested that it remains locked in a dispute with Dutch GasTerra.
Engie recognised impairments weighing on 2016 net income, amounting to €3.8bn, so less than its €6.8bn impairments in 2015. It said the pre-tax effect was €4.2bn, of which €2.5bn due on tangible, intangible, financial assets and entities accounted for using the equity method, and €1.7bn on goodwills.
The €3.8bn of net 2016 impairments were made up of €1.5bn because of the price impact on its Europe merchant power generation, €1bn for nuclear decommissioning due to "the revision of nuclear provisions in Belgium", and €0.4bn for the market impact on its global E&P, LNG and ship technology GTT businesses.
(Credit: Engie)
Its operating income amounted to €6.2bn, down €0.1bn on a reported basis and up 1.6% on an organic basis compared to December 31, 2015. Revenues were little changed on the year at €66.6bn, compared with €69.9bn in 2015.
The company is ahead of its 2016 "Lean 18" roadmap and is accordingly raising its sights by 20%, so aiming for net savings of €1.bn by 2018. CEO Isabelle Kocher (pictured above) said: "Our results for 2016 are robust, in line with guidance. We are ahead of schedule on our 3-year transformation plan. In one year, we have already signed more than 50% of the planned disposals and identified 75% of the investments. We are focusing and accelerating the development of our three core businesses: low-carbon generation, global networks – mainly gas ones – and integrated solutions for our customers."
William Powell