LNG

Costly investment programmes to facilitate Europe’s green energy transition are weakening the credit metrics of regulated gas and electricity networks. Moody’s Ratings hence changed the outlook of European TSOs to ‘negative’ from ‘stable’.

Transparent and established regulation still supports credit quality, but regulators struggle to facilitate infrastructure investment at an affordable cost. “If shareholders consider allowed returns or cost recovery mechanisms to be insufficient, then support will fall short of maintaining credit quality,” analysts commented.

Europe's power grids and gas network operators are hard pressed to handle the substantial growth in load-related Capex required, and planned investments, said Phil Cope, senior credit officer at Moody’s Ratings.“Pressing demands arise from the need to grid-connect more renewables and accommodate rising volumes of electricity demand other sectors, e.g. heating (heat pumps), transport (electric vehicles), and data centres, where demands for capacity will intensify to support the growth in AI,” he explained.

Capital spending has grown significantly in recent years: Five-year Capex guidance for many networks – especially electricity transmission – is at least double that of five years ago. The current regulatory framework allows many gas and power network operators to recover investment over 20 to 50 years. But analysts warn the surge in Capex dwarfs the rise to network companies’ operating cash flow and this, in turn, weakens cash-flow based credit metrics.

TenneT, the TSO handling the power grid in the Netherlands and part of Germany, has seen its five-year Capex guidance soar from €40 billion in 2023 to over €62 billion this year – with no end in sight. The Belgian/German network operator Elia, meanwhile, has seen the same Capex metric almost double from around €16 billion to €30 billion over the same period.

The French and Spanish utilities ENGIE and Iberdrola have either increased or stated their intention to rise their exposure to regulated electricity networks. Moody’s reckons this is because they aim to improve their risk profile by benefitting from the “growth in higher quality earnings” as these networks carry out their investment programs. Others, notably SSE of Scotland and the German regional utility EnBW have reduced their exposure by selling their minority stakes in their power transmission businesses in recent years.

July 11 (LNGJ) - Two LNG and natural gas market players, the French energy company Engie and the Australian bank Macquarie, have signed a joint venture deal to expand a Mexican gas pipeline system. The partnership involves Macquarie acquiring a 50 percent stake to help finance the construction of a 700-kilometres (435-mile) natural gas pipeline.

   The enterprise value of the Mayakan project will be around $3 billion. The new pipeline will double the natural gas transportation capacity for the Yucatán Peninsula and when completed will pass through the states of Chiapas, Tabasco, Campeche and Yucatán.

Dec 29 (LNGJ) - Engie Brasil, formerly known as Tractebel Energia and a Brazilian subsidiary of France-based European utility group Engie, has reached an agreement to sell a 15 percent stake in natural gas pipeline firm Transportadora Associada de Gas (TAG) to the Canadian pension fund, Caisse de dépôt et placement du Québec (CDPQ) for 3.1 billion Brazilian reais (US$640 million). TAG owns and operates a large part of Brazil's natural gas pipeline network with some 4,500 kilometres (2,800 miles) across 10 Brazilian states.

   The transaction when completed will increase CDPQ’s stake in TAG to 50 percent. Engie Brasil will own 17.5 percent and its French parent company will hold the rest, giving Engie units a 50 percent shareholding. Engie and CDPQ jointly acquired a 90 percent stake in TAG in 2019 from Brazil’s state-run energy company Petrobras for about $8.6Bln and afterwards bought the remaining 10 percent still held by Petrobras.

Elengy, the operator of three terminals in Western and Southern France at Montoir-de-Bretagne, Fos Tonkin and Fos Cavaou has increased the LNG trucking capabilities at the Fos Cavaou facility located west of the Mediterranean port of Marseille.

The Managing Director of Elengy, Nelly Nicoli, inaugurated the two new tank-truck loading bays at the Fos Cavaou terminal.

The LNG fuel expansion event was also attended by René Raimondi, Mayor of the town of Fos, Hervé Martel, President of the Grand Port Maritime de Marseilles, and Régis Passerieux, Sub-Prefect of the district of Istres.

The new loading bays at Fos Cavaou now give the West Med terminal four bays with the capacity to offer 22,000 slots a year.

“LNG constitutes an immediate and effective response to the challenges of the energy transition in the road transport sector by reducing carbon-dioxide emissions,” stated Nicoli.

Commissioning

“With this commissioning, Elengy will continue with the development of its infrastructure to provide reliable and sustainable access to LNG for road transport,” added Nicoli.

“The two new bays of Fos Cavaou represented an investment of €10 million ($10.8M),” she stated.

Elengy has been expanding LNG truck-loading bays since 2013 at the Montoir-de-Bretagne and the Fos Tokin and Fos Cavaou terminals.

Over the past 10 years around 70,000 trucks have been loaded with LNG for the gradually expanding fuel market in the European Union.

Ship movements

Elengy’s three regulated terminals offer market flexibility for the unloading or loading of any type of LNG carriers as well as trans-shipment services.

The company’s LNG carrier traffic amounts to around 330 ships per annum at the three facilities.

Elengy added that during 2023 LNG had also been loaded into ISO containers at the Fos terminals for transportation by rail.

The company said it was also developing its services by investing in the development of bio-LNG made from waste to reduce the environmental footprint of the fuel.

French utility and LNG market participant Engie reported a more than 60 percent surge in revenues, though real net income plunged and the company said it was going ahead with an arbitration procedure against Russia’s Gazprom.

The bankruptcy procedure for Nord Stream II AG, the Swiss-based operator of the Nord Stream II gas pipeline from Russia to Germany under the Baltic Sea, was extended by six more months until July 2023, according to the Swiss Official Gazette of Commerce.

Gasunie subsidiary, EemsEnergyTerminal, has sold the remaining LNG capacity at its Eemshaven terminal to French energy company, Engie.

Engie, the France-based European utility company, reported an annual profit of €3.7 billion ($4.2Bln) compared with a loss of €1.5Bln in 2020 as the natural gas and power network businesses improved and nuclear turned a profit while renewables were disappointing given the amount of investment and promotion.

While imports of liquefied natural gas to the European Union and the UK are increasing in January, none of the natural gas is ending up in Germany because there is no LNG infrastructure even amid various plans spanning almost 10 years.

Elengy, the French LNG import terminal owner, and TotalEnergies said that France’s first LNG bunkering vessel, “Gas Vitality”, has loaded a cargo at the Fos Cavaou LNG terminal, located west of the Mediterranean port of Marseille.