Spain's GN Shrugs off Colombia Woes

Spain’s Gas Natural has downplayed the repercussions of Colombia debts by deconsolidating its subsidiary there, actually reducing GN group net debt.

It reported full year 2016 net income of €1.347bn ($1.43bn), 10% less than in 2015, and a 4Q 2016 profit of €417mn, up 2% year on year, on February 8.

GN reduced net debt at end-2016 by 1.4% year on year to €15.42bn, chiefly by deconsolidating its Colombian retail and supply subsidiary Electricaribe which led to a €536mn reduction in group debt. In November, GN said its 85.38%-owned Electricaribe was owed 4.05 trillion Colombian pesos (€1.26bn) by customers and had been taken over by the authorities there "as a precautionary measure" to tackle customer non-payment and fraud.

In what had been a “complicated year” in 2016, CEO Rafael Villaseca told a briefing February 8 that GN “has lost control over” Electricaribe and had thus deconsolidated it as of December 31 2016, treating it since as a financial investment “with a fair value of €475mn”; it would continue arbitration with Colombia with a view to obtaining a settlement, he said.

Electricaribe supplies over 2.5mn customers in the coastal area of Colombia and has a distribution network of 54,000 km; it is also an energy supplier (Photo credit: Electricaribe)

In its 2016 results on February 8, GN said the government takeover of Electricaribe had been extended by a further two months from January 11. Despite its Colombia problems, GN insisted they currently have no impact on guidance for the GN group’s net income, of €1.3bn-€1.4bn this year and some €1.8bn in 2018. GN’s current share price appears to reflect this sang froid: it is €18.30, about 14% higher than in November.

Italian assets on the market

GN would continue with its programme of divesting non-strategic assets, the CEO said. Reuters had reported that it had put up its Italian assets for sale. Villaseca indicated this was correct, saying the assets might be “optimised” but added: “We’ve made no decision what we will do with the assets in Italy.”

GN wholesale gas supplies in 2016 were up 3.4% globally at 295.3 TWh (27.5bn m³). That comprises 4% lower sales in Spain, at 151.8 TWh, and 8.3% less global LNG marketed, at 69.3 TWh, but 43% more sold in the rest of Europe at 69.3 TWh. Overall gas supplies in 4Q were 16.5% higher year on year at 82.3 TWh.

Villaseca said GN was taking delivery of four new LNG tankers in 2016-20 to transport volumes under its US offtake contract with Cheniere; two such ships had already been delivered; the two more yet to be delivered would cost some €500mn in 2017.

GN expects that its overall gas portfolio (purchases) in 2017 would increase by 6% to 340 TWh (31.6bn m³), driven by new US LNG import volumes offset by a reduction of its European spot gas purchasing. Villaseca said 90% of its portfolio is pre-sold this year, with 10% left open for spot sales.

Villaseca was “delighted with the support and advice” provided by US private equity fund Global Infrastructure Partners, GN’s new core shareholder since September 2016.

Mark Smedley