Spanish Utility Enagas Spreads its Risks
Spanish transmission system operator Enagas made an after-tax profit of €422.6mn last year, exceeding its target for the thirteenth year running, it said February 18. This year it is targeting €440mn with a bigger contribution from stakes in overseas companies including US midstream company Tallgrass Energy; Greek transmission system operator Desfa; Chilean regasification plant LNG Quintero; and Peruvian TgP. Overseas investments added €162mn to its pre-tax earnings last year.
Its main focus however is on the Spanish gas system which has seen LNG market growth and higher throughput. Last year, LNG storage rose 32%, regasification rose 28% and storage contracting exceeded 95%.
Spain’s gas demand rose 14% in 2019 year on year, reaching 398 TWh, the highest figure since 2010. This was mostly because of switching from coal to gas in the power sector (up 80% and saving 14mn metric tons of carbon emissions) and to a lesser extent, by industry: gas demand there was up 2%. Industry accounts for about 60% of the total, with 214 TWh in 2019.
Looking ahead, it hopes that its investment in LNG bunkering will save “between 2mn and 4mn metric tons of CO2 will be avoided by 2030.”
Investments abroad will protect it from harsh regulation at home. Last year it agreed to buy about 30% of US midstream oil and gas company Tallgrass Energy, in two phases at an overall cost of $1.62bn. Due to close this year but contributing to cashflow since last April, the deal “practically compensates for the effect of the regulatory reform established by the new methodology for the remuneration of regulated transportation and natural gas regasification activities for the period 2021-2026. In addition, this operation reinforces the sustainability of the dividend in the medium and long term,” it said.
The deal was financed by a well-subscribed equity raise of €500mn, which drew in some new investors such as Pontagedea (5%) while others invested in order to retain their percentage such as SEPI (still at 5%).
Standard & Poor's and Fitch credit rating agencies have set Enagas' long-term rating at BBB + with a stable outlook, in line with other similar European companies and TSO (Transmission System Operator).
Enagas estimates an average annual dividend from its stakes overseas to yield €300mn until 2026, compared with €123mn last year, split between Latin America (40 %), US (46%) and Europe (14%).