Engie Takes a Hit from Covid, Weather

French utility Engie is expecting a significant improvement this year after Covid-19 wiped $1.2bn from its earnings in 2020 – "assuming no additional stringent lockdowns and a gradual easing of restrictions over 2021" – it said February 26. Most of the losses were in the first half of 2020, with the second half being similar to previous years on a like-for-like basis.

But it is expecting a net negative impact this year of beween €80mn and €120mn following the cold blast in Europe and Texas, which hit its renewables and supply businesses. 

The current operating income (COI) of its supply business fell €233mn to €112mn last year from the 2019 figure, with Covid-19 wiping some €290mn from its businesses in Europe and the US during the lockdown periods.

Last year's growth capital expenditure of €3.95bn went on renewable (39%) and networks (38%), and the two are expected to account for 90% of growth capex this year. On an organic basis the renewables business COI was up 10.8% while for networks it was down 14%.

Engie is expecting a net recurring income in the range of €2.3bn-2.5bn, based on indicative pre-tax earnings (Ebitda) between €9.9bn and €10.3bn and a current operating income (COI) in the range €5.2bn-5.6bn. Last year's COI was $4.6bn, down from €5.8bn in 2019. Pre-tax earnings were €9.3bn, down from €10.4bn; and revenues were €55.8bn, down from €60.1bn.

COI from networks was €2.1bn, down 14% on an organic basis. In France, performance was impacted by unusually mild temperature and Covid-19, which was partly offset by lower levels of expenditure during lockdown. Regulatory effects also cut earnings from networks.

Engie is pouring money into renewable gas, in order to enable an affordable and smooth energy transition through the continued use of natural gas, and progressive increase in the use of renewable gases such as biomethane and hydrogen.

Last year another 91 biomethane production units were connected to French gas grids, and over 85% of these were connected to the Engie network. Altogether these units can add up to 3.9 TWh/yr, enough to heat some 1mn new-build homes in France. Engie has also started to adapt the existing gas transport networks by commissioning three ‘reverse-flow’ installations in 2020, that allow biomethane to travel from the distribution gid to gas storage units.

Its fleet of gas-fired power plants was worked hard, thanks to its highly contracted portfolio outside Europe and the optionality value of its merchant fleet in Europe. In August and November 2020, the de-mothballing of two CCGT units in the Netherlands for 0.7 GW "showed the thermal fleet’s flexibility to take advantage of market opportunities," it said.

But a change in the Belgian nuclear plant extension plan and changes in the commodity price scenario have led to an impairment of €2.9bn for nuclear assets.