Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enagas SA (ENGGF, Financial) has successfully divested its 30.2% stake in Tallgrass Energy for $1.1 billion, strengthening its balance sheet and reducing debt by approximately EUR2.4 billion.
- The company is strategically positioned to invest in green hydrogen infrastructure, with significant progress in major hydrogen projects selected as European Projects of Common Interest.
- Enagas SA (ENGGF) has maintained a strong financial performance, with EBITDA up 3.7% year-on-year and a 10% increase in net profit excluding asset sales.
- The company's efficiency plan has effectively controlled operating expenses, keeping them in line with strategic goals.
- Enagas SA (ENGGF) has received positive recognition from rating agencies, with Fitch upgrading its rating from BBB to BBB+ and Moody's raising its outlook to positive.
Negative Points
- The sale of the Tallgrass stake resulted in an expected capital loss of approximately EUR360 million, impacting after-tax profit negatively.
- Total demand for gas in the first half of 2024 decreased by 7.2% year-on-year, primarily due to increased renewable energy contributions and high winter temperatures.
- The arbitration proceedings in Peru remain unresolved, with uncertainty around the timing and outcome of the award.
- The company's future dividend sustainability beyond 2026 is contingent on maintaining a payout ratio of around 40%, with potential fluctuations in financial performance.
- There is uncertainty regarding the approval and content of the 2023-2030 National Energy and Climate Plan, which could impact future investment strategies.
Q & A Highlights
Q: Could you elaborate on the sustainability of the dividend beyond 2026, especially after the Tallgrass divestment?
A: The sustainability of our dividend beyond 2026 is reinforced by the Tallgrass divestment. We expect an improvement in our underlying business, with lower interest costs and increased dividends from investee companies, leading to an average of over EUR540 million per year. This supports a sustainable dividend range of EUR0.8 to EUR1.2 per share, maintaining a payout ratio of around 40%. - Unidentified Participant
Q: What is the status of the arbitration proceedings in Peru, and what are the implications for reaching an agreement?
A: We expect the arbitration award to be announced soon, following the rejection of the Peruvian government's last request. We aim to start negotiations with the Peruvian government to agree on repayment terms once the award is received, expected in the first semester of next year. - Unidentified Participant
Q: When do you plan to update your business plan, and what factors are influencing this timeline?
A: We plan to update our strategy plan by the end of the year. The Tallgrass divestment provides visibility, but we need regulatory signals for the next period and details on the hydrogen regulatory framework before presenting a completely new plan. - Unidentified Participant
Q: What are your plans for the balance sheet impact of the Tallgrass transaction?
A: The additional cash from the Tallgrass transaction will primarily support our EUR3.2 billion hydrogen infrastructure program. It also allows for credit rating improvements and potential growth opportunities in CO2 and ammonia handling, while prioritizing hydrogen infrastructure and credit rating enhancement. - Arturo Aizpiri, CEO
Q: Can you quantify the expected revenue improvements from El Musel and COPEX in 2024?
A: The COPEX is expected to provide an additional EUR10 million in 2024, while Musel E-Hub will contribute approximately EUR5 million. Overall, Musel's full-year EBITDA contribution is around EUR30 million, with total revenue contributions from both COPEX and Musel expected to be around EUR80 million. - Luis Romero, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
