France’s Engie mulls acquisitions to expand in LNG, renewables market

4/28/2015

By TARA PATEL
Bloomberg

Engie, the French utility built from a decade of mergers, will consider further acquisitions as it seeks to expand its presence in renewable energy and the global market for natural gas shipments.

The company, previously known as GDF Suez, is “open” and looking at possible opportunities, CEO Gerard Mestrallet said on a conference call Monday. “Will Engie participate in consolidation? Why not?” he said when asked about Royal Dutch Shell’s $70 billion move for BG Group. to form the world’s biggest producer of liquefied natural gas, or LNG.

The utility is re-branding itself as it seeks to adapt to changes in energy demand in European countries, shifting toward cleaner sources and power-efficiency technology. The company will also focus on markets with high growth potential in Latin America and the Middle East and plans to raise LNG production volumes, notably from the US, Mestrallet said.

Engie said Monday that first-quarter earnings fell 10% following outages of nuclear reactors in Belgium and a prolonged drought that pared hydroelectric output in Brazil.

The utility is confirming 2015 targets, and the payout for the year will be a minimum of 1 euro a share “under all circumstances,” even if the Belgium reactors don’t restart, Mestrallet said.

Earnings before interest, tax, depreciation and amortization slid to 3.6 billion euros ($3.9 billion) from a restated 4 billion euros a year earlier, the utility said in a statement. The result compares with the 3.7 billion-euro average of nine analysts’ estimates compiled by Bloomberg. In affirming its full-year forecasts, the Courbevoie-based company said its performance would be better in the second half.

Reactor Cracks

Two reactors in Belgium were halted because of cracks in their cores. The fault is being investigated and the utility is counting on them restarting July 1.

Engineers at Engie’s Belgian nuclear operator Electrabel SA are “confident” the reactors can safely restart, although the decision lies in the hands of the regulator, Mestrallet said.

The utility has closed or mothballed more than 11,000 megawatts of capacity in Europe because of waning demand for gas-fired electricity. Its remaining fleet of thermal plants could be “pooled” with those of other companies in the market, Deputy CEO Isabelle Kocher said on the call.

The utility is expecting net recurring income of between 3 billion euros and 3.3 billion euros this year. The range is based on Ebitda this year of between 11.7 billion euros and 12.3 billion euros.

“We are confident in reaching the range that we gave,” Kocher said.

Net debt was 26.8 billion euros at the end of March, compared with an organic comparison of 26.3 billion euros at the end of December.