France’s Engie sees 2015 profit at low end of target as LNG falls

By FRANCOIS de BEAUPUY
Bloomberg

Engie, the French energy company formerly known as GDF Suez, said full-year earnings will be towards the low end if its forecast after a drop in oil and gas prices hurt revenue and profit in the first nine months of the year.

Earnings before interest, taxes, depreciation and amortization declined 7.5% in the first nine months of 2015 to 8.1 billion euros ($8.8 billion), the company, based in Courbevoie near Paris, said this week in a statement. Engie reiterated its full-year targets, including net recurring income of 2.75 billion to 3.05 billion euros.

“In light of the performance for the first nine months of the year” Engie expects recurring net income for 2015 to be at the low end of that range, the company said. It’s “foreseeable” that the company will write down the value of some assets, which would have an impact on net income, according to the statement.

Engie earnings have been crimped by the halt of two nuclear reactors in Belgium because of safety concerns, as well as lackluster demand for natural gas in Europe and a drought in Brazil, where it operates dams.

Dividend Priority

The dividend is a “top priority” and the company has some “flexibility” to adjust its growth capital expenditure, chief financial officer Judith Hartmann said on a conference call.

The company on Oct. 1 cut its 2015 earnings forecast by 100 million euros as the halt of its Doel-3 and Tihange-2 nuclear plants in Belgium was extended until the start of next year. The outage is trimming the group’s net recurring income by about 40 million euros/month on average, Engie said.

Selling a stake in Belgian unit Electrabel “is not on the table today” and the priority is to get regulatory approval to restart and extend the lifespan of its nuclear plants there, the CEO Gerard Mestrallet said on the conference call. “For the rest, we will see next year.”

“Our board is open to any decision that will create value for the group” including the potential sale of coal-fired and other thermal power plants, Mestrallet said.

Engie has “no intention” of buying out minority shareholders of its Brazilian unit Tractabel Energia, Mestrallet said. The company continues to develop some projects in Brazil, while it will be “very cautious” on any potential acquisitions there, he said.

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