Peru Impacts Enagas Profits

Spanish gas grid and LNG terminals operator Enagas said in annual results February 14 that gas demand in Spain so far this year is significantly higher than in early 2016. It also acknowledged the damage from having invested in a Peruvian gas pipeline concession led by Brazilian contractor Odebrecht.

Demand for gas in Spain last year grew by 2.1% on 2015, reaching 321.5 TWh (29.9bn m³), an increase for the second year running. However in 2017 until February 9, Spanish gas demand had risen by 20% year on year as a result of the cold snap, with gas use in power plants up 32%, said Enagas.

The company reported its net profit in 2016 was €417.2mn, 1.1% higher year on year, of which 10% came from its projects outside Spain.

However its 2016 income included a negative impact of €41.5mn for termination by the Peruvian government of the Gasoducto del Sur Peruano (GSP) concession on January 23 2017. Odebrecht, which led the concession, became mired in investigations over its alleged bribing of politicians across South America which thwarted a planned sale of its GSP stake to a fund manager.

Peru’s president Pedro Pablo Kuczynski on February 12 confirmed that the government had collected the $262.5mn non-performance penalty from the Odebrecht-led GSP consortium (Enagas stake 25%), reported Peruvian news agency Andina.  

Enagas's assets (wholly and part-owned) in Spain and overseas (Map credit: Enagas)

Enagas signalled that further writedowns due to GSP might be incurred this year, as it had invested $275mn to date in the venture and contributed $162mn in bank guarantees in a bridging loan and $65mn in performance guarantees. Ratings agency Standard & Poors has said that Enagas’ current rating is unaffected by the GSP termination, while Enagas itself said there may be some prospect of recovering some of its GSP investment.

2016 investments by Enagas

Enagas invested €912.2mn last year, of which €199.3mn in Spain and €712.9mn overseas.

International investments were mainly in GSP (Peru) and the Trans-Adriatic Pipeline (Italy), while the acquisition of a further 4.6% stake in another Peruvian pipeline TgP cost €87.1mn and increased Enagas's stake from 24.3% to 28.9%. Enagas also acquired a further 40% stake in Chile's Quintero LNG import terminal for €355.7mn, taking its stake to 60.4%. 

In Spain, €106.7mn was spent to increase its stake in Saggas, owner of the Sagunto LNG terminal, from 30% to 72.5%.

Mark Smedley