Spanish utility Naturgy with US and Russian LNG volumes swings back to first-half net profits

Wednesday, 24 July 2019
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Naturgy Energy Group, the Spanish utility with major US and Russian liquefied natural gas supply contracts as well as gas and power businesses in six Latin American countries, returned to a net profit in the first half of 2019 from a heavy loss in the year-ago period.

Naturgy posted a first-half net profit of 592 euros ($660M) compared with a loss of 3.28 billion euros reported in the same six months of 2018.

The utility had approved a new strategic plan in 2018 through to 2022 as well as a company overhaul. This meant that assets were impaired to the amount of 4.85Bln euros due to the re-measurement of the estimated future cash flows.

Naturgy is one of the companies that have signed 20-year agreements for US cargoes from Cheniere Energy’s Sabine Pass and Corpus Christi plants and is also a main contract holder for cargoes from the Yamal LNG plant in Arctic Russia operated by natural gas company Novatek.

The US and Russian volumes were booked under Naturgy's previous name, Gas Natural Fenosa.

The utility’s international LNG earnings in the first half dropped by 32.2 percent to 158M euros from 233M euros in the 2018 first-half.

European power generation earnings fell by 27.7 percent to 120M euros from 166M euros a year ago.

“In Gas & Power, the first half results have been driven by a notable improvement in services sales, which has experienced a strong margin recovery in power supply, more than offsetting a more challenging scenario in International LNG and Europe Power generation,” said Naturgy.

“The company’s new commercial policies and de-risking efforts, together with efficiencies, have also helped offset the global decline in gas prices during the period,” it added.

“The company has continued to work on improving the risk profile of its merchant activities. As such, in International LNG, for example, Naturgy has already secured approximately 90 percent of its LNG volumes for the year while in Power supply, it has continued to reduce its portfolio of fixed price sales contracts,” the company explained.

Overall gross earnings in the Gas & Power division rose 7.6 percent to 640M euros from 595M euros in the same six months of last year.

Natural gas sales in Spain declined by 8.3 percent in the first half to 116,131 gigawatt hours compared with 126,587 GWh in the first half of 2018.

“This was mainly as a result of lower sales in the Spanish residential and industrial segments (down 11.8 percent and down 14.4 percent respectively), partially compensated by higher sales to combined-cycle gas-fired power plants (up 14.0 percent) and third parties (+17.7 percent),” said Naturgy.

In its other divisions European, Middle East and Africa Infrastructure earned 919M euros, up 3.1 percent.

The Latin America South Infrastructure earnings rose 23.8 percent to 448M euros, while Latin America North Infrastructure, comprising Mexico gas and Panama electricity, came in at 189M euros, up 53.7 percent.

Latin America South includes, Chile electricity, Chile gas, Brazil gas, Argentina gas and electricity and Peru gas.

Therefore, Naturgy posted a 7.5 percent rise in first-half gross earnings of 2.15Bln euros versus 2.00Bln in the same period of 2018.

Naturgy’s net sales dropped 4.4 percent to 11.63Bln euros from 12.17Bln in the first half of last year.

The company’s diverse LNG supply portfolio also includes shipments from Algeria, Qatar and Nigeria. The company additionally owns a small fleet of LNG vessels.

 

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