France's Engie surprises with higher guidance
Recasts, adds CEO comments on acquisitions, paragraphs 13-16
By Dominique Patton
PARIS, Aug 2(Reuters) -Engie ENGIE.PA cheered investors on Friday with a raised outlook buoyed by its flexible power services and despite a first-half fall in profit as gas prices came off year-ago highs.
The French utility said it now expects a net recurring income on a group share basis this year of 5 billion euros to 5.6 billion euros ($5.41 billion to $6.06 billion), up from 4.2 billion to 4.8 billion.
Its shares were up 4% in morning trading on the surprise forecast upgrade.
FLEXIBLE POWER
Regarding the outlook, CFO Pierre-François Riolacci said higher-than-expected volumes of rain in Europe had boosted hydropower volumes by 30% while more renewable energy capacity meant rising volatility, boosting demand for Engie's flexible generation unit.
Its Flex Gen unit posted a 31.9% jump in earnings.
"With the increased penetration of renewables there is more volatility in the market and therefore there is the ability particularly for our European gas plants to capture more value," Riolacci said.
The company, which sells and trades electricity and gas, posted a 16.3% fall in first-half earnings before interest and tax (EBIT), excluding nuclear, to 5.6 billion euros ($6.05 billion).
Profits a year ago at Engie, the largest gas network operator in Europe, had benefitted from high regional gas prices and volatility.
The results were above expectations, said analysts at JPMorgan, with good performance across its businesses, and "exceptional performance" in flexible generation.
EBIT at its Global Energy Management and Sales unit fell 38% to 1.95 billion euros as prices normalised and on milder winter weather.
Its renewables business posted a 5.7% rise in earnings to 1.3 billion euros, buoyed by more rain in France and Portugal and new capacity in Latin America.
EBIT from its Networks unit fell 12.7% on an organic basis due to smaller volumes of gas sent from France to Germany and lower distributed volumes in France due to mild weather.
DISTRIBUTION ACQUISITIONS
CEO Catherine MacGregor told analysts on a call that Engie continues to look "very carefully" at acquiring distribution assets, as part of a shift launched in 2021 to rebalance its business towards more power and less gas.
Reuters reported last month that Engie had joined forces with Caisse de dépôt et placement du Québec (CDPQ), Canada's second-largest pension fund, to try to buy British power network Electricity North West (ENWL).
MacGregor declined to directly confirm the report, but said the French company had submitted an offer to buy a UK asset that was rejected.
"We will look out for similar opportunities but there are not that many," MacGregor said.
($1 = 0.9240 euros)
Reporting by Dominique Patton; editing by Jacqueline Wong and Jason Neely
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
