ENGIE has repositioned its portfolio, laying the foundations for future growth. Today the portfolio is less exposed to market risks, cleaner and more profitable. Full year 2017 results are in line with the Group’s objectives: a net recurring income, Group share of EUR 2.6 billion and a significant reduction of the net financial debt. For 2018, a sustained organic growth is expected in comparison with 2017, as well as a higher dividend (+ 7.1%).
ENGIE was able to withstand the impact of a vigorous strategic repositioning: EUR 13.2 billion of disposals and EUR 13.9 billion of investments secured in profitable activities offering attractive growth prospects, while also achieving more than EUR 1 billion of costs savings.
ENGIE’s profile is now less risky (89% of EBITDA is contracted or regulated), cleaner (90% of EBITDA comes from low CO2 activities) but also more profitable (ROCEp (4) now reaches 7.2%, up +70bps vs. 2015). The financial structure is healthy with less debt, stronger liquidity and the best rating within the sector.
For 2018, ENGIE expects a net recurring income, Group share, excluding E&P and LNG, between EUR 2.45 and 2.65 billion (5) i.e. a gross increase of 8% vs. 2017. Thus, ENGIE announces a higher dividend for fiscal year 2018, at EUR 0.75 per share.
During the full year results presentation, Isabelle Kocher, Chief Executive Officer of ENGIE, stated: “Our good results in 2017 confirm the relevance of ENGIE’s strategy. We achieve an ambitious repositioning by reinvesting massively in low CO2 generation, networks and client solutions, laying the foundations for future growth. We now have a cleaner, less risky and more profitable portfolio of activities. The return to organic growth, which is the result of our teams’ work and engagement, is confirmed and allow us to anticipate strong results and a higher shareholder remuneration for 2018.”
Revenues increased by 0.3% on a reported basis to EUR 65.0 billion and by 1.7% on an organic basis compared with 2016. Reported growth was affected by changes in the scope of consolidation (EUR 583 million negative impact) due mainly to the disposal of the merchant power generation assets in the United States, Poland and the United Kingdom. This was partially offset by the acquisition of Keepmoat Regeneration which designs, builds, refurbishes and regenerates residential buildings, and by a negative foreign exchange effect of EUR 300 million, chiefly related to fluctuations in the pound sterling. Organic revenue growth was driven by an increase in volumes and prices on commodities sold in the gas midstream business in Europe and liquefied natural gas (LNG) business in Asia, an improved performance of the thermal power generation plants in Europe and Australia, the impact of new assets commissioned and tariffs increases in Latin America, and the impact of the 2016 tariffs revisions in the infrastructure business in France. These positive developments were partially offset by a fall in sales of natural gas to business clients in France and by a decrease in hydro renewable energy generation in France.
EBITDA amounted to EUR 9.3 billion, down 1.8% on a reported basis but up a sharp 5.3% on an organic basis. The reported fall was due to changes in the scope of consolidation (EUR 677 million negative impact), due mainly to the disposal of merchant power generation assets in the United States in June 2016 and February 2017 and the disposal of Paiton in Indonesia at end 2016, coupled with the recognition in EBITDA as from 2017 of the nuclear contribution in Belgium (EUR 142 million negative impact). These negative impacts were partially offset by a limited positive foreign exchange effect (EUR 26 million) related notably to the Brazilian real. The organic growth in EBITDA was driven by revenue-related developments (excluding LNG and gas midstream activities), by the effects of the Lean 2018 performance program (EUR 393 million) and by a slightly unfavourable temperature effect (EUR - 58 million). This organic evolution reflects the good performance of the growth engines, namely the activities of renewable and thermal contracted power generation, networks and client solutions.
Current operating income after share in net income of entities accounted for using the equity method decreased by 6.4% on a reported basis but increased by 5.0% on an organic basis to EUR 5.3 billion. The organic growth in EBITDA was mitigated by higher depreciation expenses following the increase at the end 2016 in dismantling provisions (booked against an asset) related to Belgian nuclear power plants.
Net recurring income, Group share with E&P underlying contribution at EUR 2.6 billion is improving compared with 2016. It includes EUR 0.2 billion of net recurring income Group share of ENGIE E&P International underlying contribution (“discontinued operations”) and excludes EUR 0.1 billion of D&A upside under IFRS 5. Taking into account this upside, reported net recurring income, Group share amounted to EUR 2.7 billion, including EUR 0.3 billion related to discontinued operations.
Net recurring income, Group share relating to continued operations amounted to EUR 2.4 billion for the year ended December 31, 2017, down 2.4% on a reported basis compared to 2016. The decrease in current operating income after the share in net income of companies accounted for using the equity method is partially offset by an improvement in recurring net financial and tax results.
Net income, Group share amounted to EUR 1.4 billion for 2017, including EUR 0.2 billion from ENGIE E&P International activities classified as "Discontinued operations". It includes notably lower impairments compared to 2016 (gross amounts of EUR 1.3 billion in 2017 vs. EUR 4.0 billion in 2016).
At December 31, 2017, net financial debt stood at EUR 22.5 billion, down EUR 2.3 billion compared with December 31, 2016, mainly due to (i) cash flow from operations (EUR 8.3 billion), (ii) the impact of the portfolio rotation program (EUR 4.8 billion), including notably the completion of the disposal of the thermal merchant power plant portfolio in the United States, Poland and the United Kingdom, the disposal of interests in Opus Energy and NuGen in the United Kingdom, the classification of the Loy Yang B coal-fired power plant in Australia under "Assets held for sale", the disposal of a 25% interest in Elengy (through the transfer of 100% of Elengy to GRTgaz) and the disposal of an interest in Petronet LNG in India, and (iii) a favorable exchange rate effect (EUR 0.7 billion). These items were partially offset by (i) gross investments in the period (EUR 9.3 billion), cf. page 6, and (ii) dividends paid to ENGIE SA shareholders (EUR 2.0 billion) and to non-controlling interests (EUR 0.6 billion). Net debt also improved thanks to the impact of the recovery from the French State of the 3% tax on dividends (EUR 0.4 billion).
Excluding E&P intercompany debt, the net financial debt stands at EUR 20.9 billion.
The net financial debt/EBITDA ratio stands at 2.25x (vs. 2.43x in 2016) and is in line with the target of ≤ 2.5x.
The net economic debt (10) /EBITDA ratio stands at 3.9x, an improvement compared with 2016 (4.0x).
The average cost of gross debt continues to decrease for the 6th consecutive year, reaching 2.63%.
At the end of December 2017, ENGIE posted a high level of available liquidity at EUR 19.1 billion, of which EUR 9.6 billion (11) was held in cash.
In April 2017, S&P confirmed ENGIE long term credit rating of ‘A-‘ with negative outlook. In June 2017, Moody’s confirmed ENGIE long term credit rating of ‘A2’ with stable outlook. In October 2017, Fitch assigned ENGIE a strong investment grade issuer rating of ‘A’ with stable outlook. ENGIE holds the highest rating among its utilities peers. According to Fitch, the assigned ratings reflect ENGIE scale and diversification and the increasing share of regulated and contracted EBITDA which helped limit the commodity price exposure, the ambitious growth in client solutions, and its conservative financial policy.
At end 2017, ENGIE has announced EUR 13.2 billion of disposals (i.e. almost 90% of total program of EUR 15 billion reduction of net debt). To date, EUR 11.6 billion are already closed. In November 2017, ENGIE announced the signing with Total of an agreement for the sale of its upstream and midstream Liquefied Natural Gas (LNG) activities, that should be closed during 2018. In 2018, ENGIE closed the disposal of the E&P International activity and of Loy Yang B coal-fired power plant in Australia.
ENGIE has invested and secured EUR 13.9 billion (i.e. 97% of total program of EUR 14.3 billion (12) growth capex over 2016-18), of which EUR 10.2 billion have been closed. This includes notably acquisitions for EUR 1.2 billion in client solutions activities: Keepmoat Regeneration (leader of regeneration services for local authorities in the United Kingdom), EVBox (largest European electric vehicle charging player), Icomera (Swedish company, leader of onboard communications solutions for public transport), and a 40% stake in Tabreed (leader of district cooling networks in the Middle East). Besides, the Group invested in renewable energy with, for example, the acquisition of the remaining 41% stake in La Compagnie du Vent (wind and solar projects developer, now integrated in ENGIE Green) allowing ENGIE to become its 100% shareholder, a 30% stake in Unisun (a Chinese solar photovoltaic company), and more recently two significant concession contracts won in Brazil for two hydropower plants.
As regards the Lean 2018 performance plan, thanks to the significant progress made to date, ENGIE decided to raise its 2018 target by EUR 100 million, for a total of EUR 1.3 billion of net gains expected at EBITDA level by 2018. At end December 2017, EUR 947 million of cumulated net gains were recorded at EBITDA level (including EUR 417 million in 2017), which is higher than the initial cumulated target of EUR 850 million by end 2017. The entire revised program has already been identified.
Finally, on the front of innovation and digital transformation, ENGIE continues to invest in preparing for the future and confirms its pioneer position in the energy and digital revolutions. In 2017, the acquisitions of EVBox and Icomera are fully in line with ENGIE’s transformation strategy at the service of smarter and greener mobility. ENGIE also announced in 2018 that it had signed an agreement for the control of Electro Power System (EPS), a specialist in energy storage solutions and microgrids that enable intermittent renewable sources to be transformed into a stable power source. Furthermore, ENGIE inaugurated last year in La Rochelle the installation of the first organic photovoltaic roof in the world. This technology has been developed by Heliatek, in which ENGIE has held a stake since 2016. ENGIE is also pursuing the worldwide deployment of Darwin, its unique digital platform for data management, which aims at boosting the performances of its renewable power generating facilities, at optimizing costs, and at developing predictive maintenance. In parallel, ENGIE develops NEMO, a global platform for supervising its heating and cooling networks. Lastly, convinced of the major role that green gases, biogas and renewable hydrogen are called to play in the energy transition, ENGIE continues to invest in their development. In 2017, ENGIE inaugurated the GAYA platform, near Lyon in France, which aims at testing the production of biomethane from dry biomass. ENGIE also participates in the deployment of the first hydrogen bus line in Pau, France, and announced the creation of a global entity dedicated to the development of renewable hydrogen in the world. The objectives of ENGIE in renewable gases in France are ambitious: 30% in 2030 and 100% in 2050.
ENGIE anticipates for 2018 a net recurring income Group share between EUR 2.45 and EUR 2.65 billion. Based on a net recurring income Group share excluding E&P and LNG of EUR 2,36 billion in 2017, this target implies a gross variation of 8% and a strong underlying organic increase.
This guidance is based on an indicative range for EBITDA of EUR 9,3 to 9,7 billion, also growing strongly organically.
For fiscal year 2017, ENGIE confirms the payment of a EUR 0.70 per share dividend, payable in cash.
For fiscal year 2018, ENGIE announces a new dividend policy, with a dividend increased to EUR 0.75 per share (+7.1%), payable in cash.
Footnotes
(1) NRIgs excluding IFRS 5 treatment for E&P, i.e. excluding the D&A upside (EUR 0.1 billion) from IFRS 5 accounting treatment (ENGIE E&P International business classified as “discontinued operations”), therefore underlying contribution of of E&P of EUR 0.2 billion.
(2) Organic variation: gross variation without scope and foreign exchange impacts.
(3) Net debt is pro forma E&P intercompany debt, whereas reported net debt amounts to EUR 22.5 bn in 2017.
(4) Return on Capital Employed based on productive capital employed end of period, i.e. excluding assets under construction for EUR 5.1 billion.
(5) These targets and this indication, excluding E&P and LNG contributions, assume average weather conditions in France, full pass through of supply costs in French regulated gas tariffs, no significant accounting changes except for IFRS 9 and IFRS 15, no major regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31, 2017 for the non-hedged part of the production, and average foreign exchange rates as follows for 2018: €/$: 1.22; €/BRL: 3.89, and without significant impacts from disposals not already announced.
(6) 2016 figures have been restated following the classification of ENGIE E&P International as “discontinued operations” as from May 11, 2017.
(7) Current operating income including share in net income of associates.
(8) Excluding restructuring costs, MtM, impairments, disposals, other non-recurring items, including financial and fiscal ones, and associated tax impacts.
(9) Develop, Build, Sell and Operate.
(10) The economic net debt reaches EUR 36.4 billion at December 31, 2017 (versus EUR 38.4 billion at December 31, 2016); it includes notably the nuclear provisions and post-employment provisions; the detailed calculation can be found in the 2017 notes to the financial statements (§ 5.7).
(11) Of which cash and cash equivalent (EUR +8.9 billion), financial assets qualifying as at fair value through income (EUR + 1,1 billion), nets of bank overdrafts (EUR -0.5 billion).
(12) Net of DBSO proceeds; excluding Capex related to E&P and upstream / midstream LNG (including Touat and Cameron) for EUR 0.3 billion and Corporate Capex for EUR 0.2 billion.
The 2017 results presentation, used during the investor conference call, is available to download from ENGIE’s website: https://www.engie.com/en/investors/results/results-2017/
The Group’s consolidated accounts and the parent company financial statements for ENGIE SA as of December 31, 2017 were approved by the Board of Directors on March 7, 2018. ENGIE’s statutory auditors have performed their audit of these accounts. The relevant audit report is currently being issued.
The complete notice of the Annual Shareholders Meeting, draft resolutions and Board of Directors’ report will be published in the second half of March.
Comparable figures as of December 31st 2016 have been restated following the classification of ENGIE E&P International as "Discontinued operations" as of May 11, 2017.
From January 1 to December 31, 2017:
Since January 1, 2018:
From January 1 to December 31, 2017:
Since January 1, 2018:
From January 1 to December 31, 2017:
Since January 1, 2018:
Important notice
The figures presented here are those customarily used and communicated to the markets by ENGIE. This message includes forward-looking information and statements. Such statements include financial projections and estimates, the assumptions on which they are based, as well as statements about projects, objectives and expectations regarding future operations, profits, or services, or future performance. Although ENGIE management believes that these forward-looking statements are reasonable, investors and ENGIE shareholders should be aware that such forward-looking information and statements are subject to many risks and uncertainties that are generally difficult to predict and beyond the control of ENGIE, and may cause results and developments to differ significantly from those expressed, implied or predicted in the forward-looking statements or information. Such risks include those explained or identified in the public documents filed by ENGIE with the French Financial Markets Authority (AMF), including those listed in the “Risk Factors” section of the ENGIE (ex GDF SUEZ) reference document filed with the AMF on March 23, 2016 (under number D.16-0195). Investors and ENGIE shareholders should note that if some or all of these risks are realized they may have a significant unfavorable impact on ENGIE.
About ENGIE
ENGIE is committed to take on the major challenges of the energy revolution, towards a more decarbonised, decentralised and digitized world. The Group aims to becoming the leader of this new energy world by focusing on three key activities for the future: low carbon generation in particular from natural gas and renewable energies, energy infrastructures and efficient solutions adapted to all its clients’ needs (individuals, businesses, territories, etc.). The customers’ satisfaction, innovation and digital are at the heart of ENGIE’s development. ENGIE is active in around 70 countries, employs 150,000 people worldwide and achieved revenues of €66.6 billion in 2016. The Group is listed on the Paris and Brussels stock exchanges (ENGI) and is represented in the main financial indices (CAC 40, BEL 20, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI Europe) and non-financial indices (DJSI World, DJSI Europe and Euronext Vigeo Eiris - World 120, Eurozone 120, Europe 120, France 20, CAC 40 Governance). To learn more : www.engie.com
