LNG

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.

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.