Leaner, Cleaner Engie Aims at 2018 Growth
French energy giant Engie is expecting strong growth in earnings this year as it consolidates the gains in efficiency achieved in 2017, it said March 8. It expects to make a net recurring income between €2.45bn and €2.65bn ($3bn-$3.3bn). Compared with €2.36bn in 2017 excluding the upstream and LNG business which are now sold off, this target implies a gross variation of 8% and a strong underlying organic increase, it said.
In all, €13.2bn of disposals were counterbalanced by €13.9bn invested in more profitable activities, and the resulting profile is now less risky as 89% of earnings before interest, tax, depreciation and amortisation is contracted or regulated; cleaner, as 90% of Ebitda comes from low CO2 activities; and also more profitable as the return on capital employed is now 7.2%, up 70 basis points on 2015. Efficiency gains and disposals helped it to pay off €2.3bn of debt, which was €22.5bn at end-2017.
Organic revenue growth came from higher prices in the gas midstream business in Europe and liquefied natural gas (LNG) business in Asia; an improved performance of the thermal power generation plants in Europe and Australia; new assets commissioned; higher prices in Latin America, and the impact of the 2016 tariffs revisions in the infrastructure business in France. These positive developments were partially offset by a fall in sales of natural gas to business clients in France and very cold January 2017 weather.
LNG earnings will be significantly depleted going into 2018, as Engie in November 2017 agreed the sale of most of its LNG business to Total - a deal expected to complete mid-2018.
CEO Isabelle Kocher said the results confirmed the return to organic growth and vindicated the corporate change of direction: “Our good results in 2017 confirm the relevance of Engie’s strategy. We achieve an ambitious repositioning by reinvesting massively in low CO2 generation, networks and client solutions, laying the foundations for future growth. We now have a cleaner, less risky and more profitable portfolio of activities."
Last month Belgian chemicals firm Solvay's current CEO Jean-Pierre Clamadieu was nominated to succeed veteran Gerard Mestrallet as Engie's new chairman, subject to shareholder approval in May. Kocher will remain as CEO.