Naturgy Group, the Spanish utility with major US and Russian LNG supply contracts as well as businesses such as the Maghreb-Europe gas pipeline and gas distribution in five Latin American countries, pledged to re-establish its Egyptian LNG output as it posted annual net losses of 2.82 billion euros ($3.22Bln) amid a corporate overhaul and charges related to simplifying the business.
Naturgy had posted a net profit of 1.36Bln euros the previous year. Gross earnings of the company, formerly known as Gas Natural Fenosa, rose 3 percent to 4.02Bln euros from 3.90Bln euros in 2017.
International LNG earnings increased by almost 80 percent to 496M euros from 276M euros in the previous year.
On the LNG business front, Naturgy is one of the companies that have signed 20-year agreements for US Sabine Pass cargoes and is also a main contract holder for cargoes from the Yamal LNG plant in Arctic Russia started by natural gas company Novatek at the end of 2017.
Its diverse LNG supply portfolio also includes shipments from Algeria, Qatar and Nigeria. The company additionally owns a small fleet of LNG vessels.
“Sales increased 15.2 percent versus 2017, supported by the entry of Sabine Pass cargoes and the first shipments of Yamal LNG,” explained the company.
“Global LNG demand has remained strong on the back of the continued appetite from Asia, which in turn has supported significant gas price increases relative to 2017,” it said.
“Naturgy’s shipping fleet has expanded during the period with the addition of two LNG tankers which have supported the increase in volumes,” added Naturgy.
The company said it changed its organisational structure with a new reporting divisions from four business units, Gas and Power, Europe and Middle East Infrastructure, South Latin America Infrastructure and North Latin America Infrastructure.
“As part of this process, the company reduced the number of subsidiaries and replaced most of its subsidiary Boards of Directors by joint administrators, while scaling down support functions at the corporate level and reallocating some of these,” said Naturgy.
“Furthermore and as part of the new strategic plan, Naturgy carried out an asset valuation review, consistent with its new strategic plan assumptions, which translated into an impairment of 4.85Bln euros, in an effort to provide a more transparent and realistic value of its asset base,” Naturgy explained.
Naturgy also pledged to re-start its LNG production at the Damietta liquefaction plant, located east of the Egyptian port of Alexandria and boosted its Algerian gas supplies.
“The company increased the visibility and de-risked its businesses as shown by the agreement to renew and extend its gas procurement contract with Sonatrach in Algeria up to 2030 under improved terms,” said Naturgy.
The company operates the Maghreb-Europe gas pipeline as well as production, storage and regasification capacity in Europe.
It also won a key court battle with the Egyptian government.
“There was a favourable award from the International Centre for Settlement of Investment Disputes in the arbitral procedure initiated by Union Fenosa Gas in Egypt (Damietta plant), which was recognised by the UK High Court of Justice as Naturgy’s, and which should allow it to reach a comprehensive agreement that will re-establish the value of the company's investment in the region,” stated Naturgy.
“Furthermore and as part of the new strategic plan, Naturgy launched a new efficiency plan targeting 500 million euros in savings in operational expenses by 2022,” said the Spanish company.
In its other divisions, the Gas & Power earnings rose by 38.8 percent to 1.36Bln euros from 980M euros in 2017.
“Gas sales remained stable in the year, driven by growth in the Spanish residential and industrial segments,” said Naturgy.
In its Latin American business, Naturgy sold its remaining stake in the gas distribution business in Colombia for 334M euros.
This part of the natural gas division involves regulated gas distribution in Argentina, Brazil, Chile, Mexico and Peru. In Chile, it also includes a gas supply business.
