Naturgy Sees Fruits of Strategic Plan in H1

The first half of the year has been marked by progress in investment in renewables and power grids, while cost savings have come in above expectations, said Spanish energy firm Naturgy July 24. 

Naturgy has also accelerated the delivery of its efficiency plan and expects to deliver savings of at least €150 ($165) mn by year end, exceeding its initial commitment of €100mn for 2019. The company reiterates its total commitment of €500mn efficiencies by 2022. 

It reported an 8% rise in pre-tax earnings to €2.277bn, mainly supported by the improvement in the infrastructure businesses and the efficiencies across businesses. Its adjusted pre-tax profit was €2.15bn and net income was €592mn.

CEO Francisco Reynes said the company was responding to the political and economic challenges the sector faced. "The world is changing, and our business is doing it at an even faster pace, so the transformation we are carrying out in Naturgy is mandatory and reinforces our global competitiveness,” he said. The company has "a new commercial policy that has allowed us to improve our margins and reduce our risk. All this together with the efficiency plan and the simplification of all our processes,” he said.

Its Gas & Power segment saw pre-tax earnings (Ebitda) of €695mn, "thanks to a strong performance of the gas, power and services sales, as well as the international power generation. On the other hand, international LNG and Europe power generation were negatively affected by lower sales and margins during the period." The company was also fined $19.5mn by the regulator for prices charged for its sales of wholesale electricity in previous years.

The company's international business grew, but it also made some disposals, including its Moldovan business and an agreement to sell transmission assets in Chile. Across the border it has entered into an asset swap in Argentina, improving its competitive position in the region where it operates.

Investments during the first six months of the year amounted to €700mn, which have been mainly allocated to renewable projects. Since the beginning of the Strategic Plan 18-22, Naturgy has invested €2bn, 70% in renewables and power grids, in line with its ambition for greater electrification.

As of June 30, 2019, net debt reached €14.8bn, 3% less than December 31, 2018, thanks to a strong focus on cash flow generation.

It faces regulatory threats at home, notably the price control for its gas and electricity distribution businesses that will apply in a few years. Naturgy said it would try to ensure that the new framework continues to recognise a "reasonable and predictable remuneration in the long term, both for investments already executed as well as for future ones." It owns gas distributor Nedgia.

As well as some debt repayment, Naturgy has completed the first €400mn tranche of its share buyback program, and will launch another of the same size unless it sees an acquisition opportunity, it said.