Engie Posts Bumper Earnings, Sees Profit Flagging From 2024

image is BloomburgMedia_S976L4DWX2PS00_26-02-2024_06-31-19_638445024000000000.jpg

A logo on the Engie SA headquarters in the La Defense business district in Paris, France, on Thursday, Jan. 21, 2021. The shift of jobs and assets to Paris after Brexit will accelerate this year, providing Europe with an opportunity to strengthen its own financial infrastructure, according to Bank of France Governor Francois Villeroy de Galhau. Photographer: Benjamin Girette/Bloomberg

Engie SA reported bumper earnings for a second year thanks to strong energy trading, continued growth in renewable-power generation and a recovery in its French retail division.

The utility is reaping the benefit of a massive push into renewables, centered on solar and wind, and is also expanding in battery storage and biomethane. That’s helped it offset a recent decline in gas and power prices that’s threatening revenue at Engie and its peers.

Net recurring income rose 2.8% last year to €5.4 billion ($5.85 billion), in line with average analyst estimates. The company reaffirmed its dividend policy, proposing a payout of €1.43 a share for the period, pending investor approval.

“These results demonstrate the progress achieved in executing our strategy, and they confirm our capacity to move forward within a volatile energy-market environment,” Chief Executive Officer Catherine MacGregor said in a statement.

The shares rose as much as 3.2%, and were up 2.7% as of 12:37 p.m. in Paris.

Engie signaled that profit will drop in 2024 — albeit less than anticipated a year ago — and may decline further in the following two years as prices recede, while it shuts three of its five remaining nuclear reactors in Belgium by the end of 2025. The weaker market will mainly hurt revenue from its nuclear plants and French hydropower assets, the CEO said on a call Thursday. 

Net recurring income will be €4.2 billion to €4.8 billion this year, Engie said. That compares with an average analyst estimate of €4.18 billion. For the coming two years, the range is seen €300 million lower than in 2024 and €500 million lower, respectively.

If energy prices were to stay “lower for longer,” the company would take action to protect earnings and cash flows, possibly by boosting cost cuts, Chief Financial Officer Pierre-Francois Riolacci said Thursday. Engie also has wiggle room to postpone some investment, while also stepping up divestment beyond the current run rate of about €1 billion per year, he said.

The company booked provisions to transfer nuclear-waste management liabilities to the Belgian state, and a took a €1.3 billion writedown tied to the shutdown of its coal-fired power plants in Chile plus wind and solar assets in the US. One of Engie’s American wind farms has been affected by faulty Nordex SE turbines, and the company will defend its rights, the CFO said, without elaborating further. 

(Updates with CFO comments on markets and Nordex starting in eighth paragraph.)

©2024 Bloomberg L.P.

By Francois de Beaupuy


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