The successful strategic repositioning of the Group on low CO2 generation, global networks and client solutions enabled to lay solid foundations of a new growth dynamics with a portfolio less exposed to market prices, cleaner and more profitable.
During first quarter 2018, the activities of the Group have shown a strong momentum and have further reinforced its leadership positions. ENGIE benefits from a healthy pipeline in renewables following recent successful auctions as well as the acquisition of a wind developer in the United States. In global networks, the regulated asset base of the Group strongly increased following the regulation of the gas storage activities in France. The commercial dynamics also remains strong in client solutions.
First quarter 2018 financial results are in line with the Group’s expected annual trajectory and the Group’s financial structure remains very strong, as confirmed by the recent upgrade in S&P’s outlook from negative to stable, with a maintained A- rating. ENGIE confirms its 2018 full-year guidance.
Upon the presentation of the 2018 first quarter financial information, Isabelle Kocher, ENGIE CEO, stated: “With a 6% EBITDA organic growth, ENGIE amplifies its positive results from last year, confirms its annual financial forecasted trajectory and demonstrates, once again, the relevance of its strategic repositioning launched 3 years ago. With a solid financial structure, the Group records an historically low debt, below EUR 20 billion, and restates all its objectives for 2018. I wish to thank the Group’s teams for their excellence: their commitment to harmonious progress and expertise on a daily basis have made these successes possible.” »
Revenues as of March 31, 2018 reach EUR 17.5 billion, up 1.2% on a gross basis and 3.0% on an organic basis.
This growth is substantially explained by the strong increase in renewable power generation in France and in Belgium, by the increase of gas and electricity sales in the retail segment in France, by the commissioning of assets in Latin America and by the favorable temperature impact for gas distribution in France. It is also driven by recent acquisitions, including new contributions from two hydroelectric power plants in Brazil, the Talen services company in the United States and Keepmoat Regeneration, the leading provider of regeneration services in the United Kingdom.
These effects are partially compensated by a negative foreign exchange impact, in particular attributable to the Brazilian real and the US dollar vs. Euro, by less favorable market conditions for thermal activities in Europe in 2018, by a decrease in achieved prices of nuclear and hydroelectric production in Belgium and France, and by the scope out effect of disposals (in particular thermal assets in Australia, in Poland and in the United Kingdom).
More details on the evolution of the revenues by reportable segment are available on pages 7 and 8.
EBITDA for the period amounts to EUR 3.2 billion, up 3.0% on a gross basis and 6.0% on an organic basis, mainly for the reasons mentioned above. In addition, the sharp increase in EBITDA is also due to a 30 basis points increase in service activities margins and to the outstanding performance of midstream gas activities in a favorable market environment in Europe.
EBITDA performance is contrasted among segments:
Current operating income reaches EUR 2.2 billion, up 3.1% on a gross basis and 5.7% on an organic basis compared to the end of March 2017, for the same reasons as for EBITDA, as depreciation remains stable versus the first quarter 2017.
As of March 31, 2018, net financial debt reaches EUR 19.4 billion, down EUR 3.1 billion from year-end 2017, mainly due to the effects of the portfolio rotation program (EUR - 2.6 billion) namely with the closing of the disposal of Exploration & Production activities in February 2018.
Cash Flow From Operations (CFFO) stands at EUR 1.5 billion over the first quarter of 2018, decreasing by EUR 0.9 billion compared to the end of March 2017. This year-on-year evolution reflects the normalization of the change in working capital for EUR - 1.1 billion (notably related to temperature effect, margin calls and financial instruments).
By the end of March 2018, the net financial debt / EBITDA ratio at 2.1x is well below the target of ≤2.5x. The Group’s average cost of gross debt slightly decreases compared to end December at 2.53%. The net economic debt / EBITDA ratio stands at 3.6x, improving5 versus end of 2017 (3.8x).
ENGIE is finalizing its transformation plan based on its three programs :
The presentation of the Group’s first quarter 2018 financial information used during the investor conference call is available from the Group’s website:
Revenues as of March 31, 2018 increase by 1.2% on a gross basis with EUR +73 million of perimeter effects (EUR -304 million of scope out effects namely due to the sale of thermal power generation activities in the United Kingdom and in Poland for EUR -215 million and EUR +377 million of scope in effects mainly due to acquisitions of Keepmoat Regeneration in the United Kingdom and Talen in the United States and to the contribution of the two hydroelectric power plants in Brazil totaling 832 MW of installed capacity), EUR -372 million mainly due to the Brazilian Real and the Dollar and EUR +499 million of organic growth. On an organic basis, revenues increase by 3.0%.
Revenues for the North America segment are up on a gross and organic basis due to the contribution of Talen in the United States and to higher B2B energy sales. These positive effects have compensated the negative effects of the foreign exchange impact and the disposal of the United States thermal merchant assets in early 2017.
Revenues for the Latin America segment are down as a result of negative foreign exchange impact, only partially offset by the positive effect following the hydroelectric concessions agreement signature in Brazil at end 2017, the commissioning of wind and solar assets in Brazil and Chile and the tariff increase in gas distribution activities in Mexico and in Argentina.
Revenues for the Africa/Asia segment are slightly down on a gross basis but up on an organic basis. The gross variation is mainly due to negative foreign exchange (Australian dollar, US dollar and Thai baht) and to the disposal of the Loy Yang B coal fired power plant in Australia. The organic variation results from higher sales in the retail activities in Australia, the higher availability of thermal contracted power generation capacities in Thailand and Turkey, partially offset by the positive impact of the closing of Fadhili power generation project in Saudi Arabia in 2017.
Revenues for the Benelux segment are increasing compared to the first quarter 2017. This increase is mainly due to the growth of service activities in Belgium and higher energy volumes sold. These positive effects offset the decrease in revenues of the nuclear power generation due to lower volumes, as a result of the outage of Doel 3, and lower achieved prices (EUR 33/MWh in 2018, representing a reduction of ca. EUR 3/MWh).
Revenues for the France segment are significantly increasing on gross and organic basis. Gross growth is explained by the acquisition of several energy services companies (MCI, CNN MCO, Icomera). The organic increase is mainly related to higher hydroelectric (up 39%) and wind power generation and to higher gas and electricity sales in the retail segment.
Revenues for the segment Europe excluding France and Benelux shows gross and organic growth. Gross growth is explained by the acquisition of Keepmoat Regeneration (buildings regeneration in the United Kingdom) which is partially offset by the negative foreign exchange effect of the British pound and the Romanian leu, as well as the disposal of gas distribution activities in Hungary at the beginning of 2018. Organic growth benefitted from higher gas prices in commercialization activities in Romania partially offset by lower distribution revenues, as well as the energy sales retail business launched in June 2017 in the United Kingdom.
Revenues for the segment Infrastructures Europe are increasing mainly due to favorable temperature effect for distribution activities and higher sales in storage activities in the United Kingdom. This increase is partially offset by a lower commercialization of storage capacity and by the negative impact of tariff revisions of transport infrastructures and of LNG terminals in France as of April 1st, 2017.
Revenues for the segment GEM are down compared to March 2017. This is due to a change in accounting method applied to the management of long-term supply contracts for gas, transport and storage capacities, partially offset by a slight increase in commodities volumes sold to professional clients in Europe compared to last year.
Revenues for the Other segment declines on a gross basis due to the disposal of thermal generation activities in the United Kingdom and Poland and on an organic basis due to the favorable market conditions in 2017 for thermal activities in Europe (with spreads decreasing by 7% and load factor decreasing by 12 basis points) and to a decrease in power sales to industrial clients in France.
Develop low CO2 power generation activities
From 1st of January to 31st of March 2018:
From 1st of April 2018:
Develop global networks, mainly gas
From 1st of January to 31st of March 2018:
Develop integrated solutions for clients
From 1st of January to 31st of March 2018:
From 1st of April 2018:
1 2017 figures restated for E&P International activities and LNG midstream and upstream activities classified as discontinued operations (as from May 2017 for EPI and as from March 2018 for LNG midstream and upstream) and for IFRS 9 & 15.
2 Excluding scope and forex effects.
3Including share in net income of associates.
4 Cash Flow From Operations (CFFO) = Free Cash Flow before maintenance Capex.
5 Figures restated for LNG midstream and upstream activities classified as discontinued operations as from March 2018
6 Cumulated impact from January 1, 2016 to March 31, 2018
7 These targets and indications exclude E&P and LNG contributions and assume average weather conditions in France, full pass through of supply costs in French regulated gas tariffs, unchanged significant Group accounting principles except for IFRS 9 & 15, no significant regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31st, 2017 for the non-hedged part of the production, and average foreign exchange rates as follows for 2018: €/$: 1.22; €/BRL: 3.89 and do not consider significant impacts on disposals not already announced at Dec, 31st 2017.
8 Dividend submitted to shareholders’ approval at the General Assembly on May 18, 2018
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 28, 2018 (under number D.18-0207). 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.
We are a global energy and services group, focused on three core activities: low-carbon power generation, mainly based on natural gas and renewable energy, global networks and customer solutions. Driven by our ambition to contribute to a harmonious progress, we take up major global challenges such as the fight against global warming, access to energy to all, or mobility, and offer our residential customers, businesses and communities energy production solutions and services that reconcile individual and collective interests. Our integrated - low-carbon, high-performing and sustainable - offers are based on digital technologies. Beyond energy, they facilitate the development of new uses and promote new ways of living and working. Our ambition is conveyed by each of our 150,000 employees in 70 countries. Together with our customers and partners, they form a community of imaginative builders who invent and build today solutions for tomorrow.
2017 turnover: 65 billion Euros. Listed in Paris and Brussels (ENGI), the Group is represented in the main financial (CAC 40, BEL 20, Euro STOXX 50, STOXX Europe 600, MSCI Europe, Euronext 100, FTSE Eurotop 100, Euro STOXX Utilities, STOXX Europe 600 Utilities) and extra-financial indices (DJSI World, DJSI Europe and Euronext Vigeo Eiris - World 120, Eurozone 120, Europe 120, France 20, CAC 40 Governance).