Spain's Endesa cuts profit, dividend outlook after LNG ruling

Spanish power utility Endesa on Thursday cut its profit and dividend outlook to take into account the impact of a court order to pay $570 million following a dispute over a long-term liquefied natural gas supply contract with Qatar.

The Spanish firm is now aiming for an adjusted profit - which strips out one-off items and is used to calculate dividend - of 1.1 billion euros ($1.20 billion) this year and 1.6 billion-1.7 billion euros in 2024, below its previous guidance.

The target for 2026 is 2.2 billion-2.3 billion euros. The group also introduced a dividend floor of 1 euro a share along with its 70% payout policy, and now sees 2024 dividend at 1.1 euro a share, slightly below a previous forecast.

Shares in the company were down 2.7% at 1118 GMT, while the wider index was little changed. The guidance for 2023 and 2024 was disappointing, JPMorgan said in a research note.

The dividend floor was "too low to make Endesa an attractive income story, meaning the income story is still fully dependent on an earnings delivery that could prove erratic depending on regulatory, legal and arbitration news flow," it said.

The group also pledged to invest 8.9 billion euros through 2026, with a growing focus on grids. Its previous plan had pledged spending of 8.6 billion euros between 2023 and 2025.

Most of the increase, roughly 200 million euros, will go to grids, which tend to offer predictable returns.

Endesa earmarked a total 2.8 billion euros for this business. Investments in renewables remain stable at 4.3 billion euros.

"In this plan we intend to be more selective in the allocation of capital focusing on high-return projects both in renewables and network businesses," CEO Jose Bogas told analysts in a call.

Hydrogen projects are not included in the plan, while batteries are, Bogas and Chief Financial Officer Marco Palermo said.

"We believe that at least up to date, (hydrogen) technology doesn't have the maturity to be commercial and needs a lot of subsidies," the CEO said.

The company released its strategic update a day after its parent Enel presented its own plan, under which it will focus its investments on power grids while being more cautious on renewable energy projects.

Some of Europe's energy giants have taken a similar stance on renewables, as the sector faces high interest rates and rising debt costs.

Endesa also said it expects to get roughly 3 billion euros from partnerships and asset sales, mostly involving existing solar assets and new renewable projects, which should help cut net debt by as much as 20% in the next three years.

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