ENGIE 2015 annual results presented by Gérard Mestrallet, Isabelle Kocher and Judith Hartmann
During the full year results presentation, Gérard Mestrallet, Chairman and Chief Executive Officer of ENGIE, stated: « In a deteriorated market context, ENGIE launches today an ambitious 3-year transformation plan to become leader of the world energy transition. This plan aims at redesigning the portfolio of activities of the Group, thanks to a EUR 22 billion Capex program and a EUR 15 billion portfolio rotation program, and at improving its risk profile by reducing its exposure to commodity prices. We want to focus on low carbon activities and on integrated customer solutions, while improving the efficiency of the Group. Our agility and our new simplified organization, closer to clients and territories, will enable us to seize new market opportunities and to develop new businesses to become a provider of global energy and digital solutions. This roadmap, we have drawn it together with Isabelle Kocher and I fully trust her, at the head of the Group, to implement it successfully.»
In order to speed-up the implementation of its strategy decided two years ago, to adapt its portfolio of activities to its long term vision and to grasp new development opportunities, the Group decides to focus its new developments on:
This acceleration will leverage upon the Group’s robust financial structure, its strong cash generation, and the three activities in which it has built historical leadership positions:
The Enterprise Project announced in 2015 is a catalyst that enables the Group to accelerate its development, the implementation of its strategy and to reinforce its capacity to create value. It already translated as from January 1st, 2016 into a simplified organization based on a territorial and decentralized approach, structured in 24 business units and five transverse métiers. It aims at deeply transforming the Group ultimately, to make it more agile, more innovative and more open to its external stakeholders.
This acceleration comes along with a 3-year transformation plan with 4 objectives:
This transformation plan aims at creating value and at improving the Group’s risk profile and is based on 3 main programs:
Despite a difficult market context characterized by the major and prolonged drop of oil, gas and power prices, which will continue to weigh on its results, the Group anticipates for 2016 a net recurring income, Group share resilient compared with 2015, comprised between EUR 2.4 and 2.7 billion. This guidance is based on an estimated range for Ebitda (6) of EUR 10.8 to 11.4 billion, assuming no significant scope out impact.
For the 2016-2018 period, the Group anticipates:
For fiscal years 2015 and 2016, the Group confirms the payment of EUR 1/share dividend per year, payable in cash.
For fiscal years 2017 and 2018, the Group commits to pay a EUR 0.70/share dividend per year, payable in cash.
Revenues of EUR 69,883 millions are in decrease of -6.4% (gross) compared with 2014 and in organic decrease of -8.8%. This decrease is mainly attributable to lower commodity prices, the decline in LNG activities and the unavailability of Doel 3 and Tihange 2 nuclear plants (during almost twelve months) and Doel 1 being offline in Belgium, partially offset by the appreciation of the US dollar against the Euro and by more favorable climatic conditions in France despite very mild temperatures towards the end of 2015 (2014 had been a particularly warm year).
Group Ebitda amounted to EUR 11,262 million, down -7.2% on a reported basis and down -9.1% on an organic basis. Ebitda was affected by the same factors as revenues, partially offset by a favorable exchange rate effect, the positive impact of climatic conditions in France, the commissioning of new assets and continued cost performance efforts.
Ebitda for the Energy International business line amounted to EUR 3,589 million, down -3.4% on a gross basis and -6.8% on an organic basis. This organic decrease reflects the contrasted performance between, on the one hand, the mature markets (-26% on an organic basis) driven by weaker performance from power generation activities (United States, Australia and United Kingdom) and from LNG operations and, on the other hand, the fast growing markets (+5% on an organic basis) due to improved performance, mainly in Brazil despite unfavorable hydrological conditions and in Peru.
Ebitda for the Energy Europe business line amounted to EUR 1,612 million, down -20.0% on a gross basis and -18.6% on an organic basis. In 2015, performance has been impacted by the unavailability of Doel 3 and Tihange 2 nuclear plants and Doel 1 being offline, by the decrease in average electricity market prices and by the adverse impact of market conditions on LNG sales. These factors were partly mitigated by more favorable climatic conditions for gas sales in France, the positive impact of supply contract renegotiations and by liquidated damages for delay collected in connection with two thermal power plant projects in Germany and the Netherlands.
Ebitda for the Global Gas & LNG business line amounted to EUR 1,625 million, down -27.0% on a gross basis, mainly due to plummeting oil and gas prices on the European and Asian markets which sharply reduced LNG arbitrage opportunities in 2015, and also due to the disruption in supplies shipped from Egypt as from January 2015 and from Yemen as from April 2015.
External LNG sales fell by -47.8 TWh to 71.4 TWh, representing 86 cargoes for 2015 compared with 119.2 TWh, or 142 cargoes for 2014, and were adversely impacted by the fall in LNG sales prices in Europe and in Asia where LNG sales prices are currently very close to European prices.
On exploration-production activities, the unfavorable price impact was partially offset by the +3.6 Mboe increase in total hydrocarbon production (59.1 Mboe in 2015 compared with 55.5 Mboe in 2014), thanks to contributions from new fields commissioned in 2014.
Ebitda for the Infrastructures business line amounted to EUR 3,402 million, up by +3.9% compared to 2014, thanks to more favorable climatic conditions in France in 2015 (+19.9 TWh) and to tariffs increases, partially offset by a downturn in volumes and the related revenues from JTS (Joint Transport Storage) services and gas purchases/sales to maintain technical storage performance.
Ebitda for the Energy Services business line amounted to EUR 1,227 million, up by +3.9% on an organic basis and by +8.9% on a gross basis buoyed by the acquisitions carried out in the second half of 2014 (Lend Lease FM in the United Kingdom, Ecova in the United States, Keppel FMO in Singapore, and Lahmeyer in Germany).
In addition, all business lines contributed to the solid progress of Perform 2015 and of the “Quick Reaction Plan” launched early 2015. During 2015, both plans have contributed to improve Group Ebitda to the extent of EUR 0.5 billion (net of cost inflation). The result of Perform 2015 is very positive, since the initial savings targets on P&L and on Capex and working capital have all been achieved and even exceeded for some of them. The cumulated impact since 2012 on net recurring income, Group share, amounts at end 2015 to more than EUR 1 billion. For the “Quick Reaction Plan”, the target of EUR 250 million has also been achieved at end 2015.
Net recurring income Group share amounted to EUR 2.6 billion, down EUR -0.1 billion in comparison with 2014. The decline in current operating income after share in net income of entities accounted for using the equity method was partially offset by lower tax expense and lower recurring financial expenses.
As of December 31st, 2015 ENGIE recognized impairments weighing on 2015 net income. The impact of these impairments on the net income, Group share amounts to EUR 6.8 billion. The gross amount of these impairments, that is prior to taxes and minorities effects, is EUR 8.7 billion, of which EUR 6.1 billion on tangible, intangible, financial assets and entities accounted for using the equity method, and EUR 2.6 billion on goodwills.
These impairments first of all relate to the exploration-production activity, heavily impacted by the major and prolonged drop in oil and gas prices, and on the LNG supply & sales activity, impacted by the turnaround of the LNG market (EUR 4.3 billion in total for both activities). Impairments also relate to power production activities in merchant markets (EUR 3.2 billion), impacted by deteriorating fundamentals and which are currently under an on-going strategic review. For the rest of the Group, impairments amount to EUR 1.2 billion and mainly relate to intangibles in France where market dynamic is among others impacted by the end of regulated tariffs for professional clients and by an intensified competitive pressure.
Net income Group share amounted to EUR -4.6 billion. As a reminder, the year 2014 had been boosted by gains on remeasuring the interest in Gaztransport & Technigaz (GTT) following the acquisition of control over the company and the loss of significant influence over the Walloon inter-municipal companies. 2015 is mainly negatively impacted by a net amount of EUR 6.8 billion in impairment losses.
ENGIE SA distributive capacity stands at EUR 36.7 billion at 31 December 2015.
Net debt stood at EUR 27.7 billion at December 31, 2015, up EUR +0.2 billion compared with net debt at December 31, 2014, namely reflecting the unfavorable impact of changes in exchange rates related to the depreciation of the Euro against major currencies (EUR +0.5 billion), while the Cash Flow From Operations is up EUR +1.9 billion year-on-year at EUR 9.8 billion. In 2015, the Group has paid dividends to ENGIE SA shareholders for EUR 2.4 billion and to non-controlling interests for EUR 0.5 billion.
Net debt/Ebitda ratio stands at 2.46x and is in line with the target ≤ 2.5x.
Early March 2015, ENGIE successfully launched a EUR 2.5 billion bond issue in four tranches at record-low coupons (notably 0% for 2 years and 1.5% for 20 years). The Group’s average cost of gross debt thus continues to decrease for the 4th consecutive year, reaching 2.99%.
At the end of December 2015, the Group posted a high level of liquidity of EUR 18 billion, of which EUR 9.4 billion was held in cash.
In April 2015, S&P rating agency confirmed the A rating of ENGIE with a stable outlook. In June 2015, Moody’s rating agency confirmed the long term A1 rating of ENGIE and revised the outlook from stable to negative. On February 12th, 2016, Moody’s placed the rating under negative watch, at the same time as for most of the other European energy players.
In addition, in the second semester of 2015, ENGIE has been named to the two most prestigious extra-financial indices: the Dow Jones Sustainability (DJSI) World and Europe, established by the extra-financial rating agency RobecoSAM. The Group’s presence in these indices places ENGIE among the top 10% of sustainability-driven companies in the "Multi- and Water Utilities" sector and recognizes its ongoing efforts in the environmental, corporate and societal responsibility fields.
ENGIE announced end 2015 its participation in the Terrawatt Initiative (TWI), a global non-profit association that will work together with the International Solar Alliance (ISA) and its member States in establishing the proper regulatory conditions for a massive deployment of competitive solar generation. The ISA has an objective to reach 1 TW of additional solar power capacity by 2030. In this context, the International Renewable Energy Agency (IRENA) and Terrawatt Initiative pledge to cooperate and to explore concrete ways to quickly implement the objectives of the Paris Agreement, with a specific focus on solar power generation.
The ex-dividend date is set for May 5th, 2016.
The presentation of 2015 results and the 2015 financial report, including the management report, consolidated financial statements and notes, are available on our website:
The Group’s consolidated accounts and the parent company financial statements for ENGIE SA as of December 31st, 2015 were approved by the Board of Directors on February 24th, 2016. The Group’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.
(5) these targets and indication assume average weather conditions in France, full pass through of supply costs in French regulated gas tariffs, no significant regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31st, 2015 for the non-hedged part of the production, and average foreign exchange rates as follows for 2016: €/$: 1.10; €/BRL: 4.59.
(6) as from January 1st, 2016, Ebitda will no longer include the non-recurring contribution from entities accounted for using the equity method (which represents in 2015 an amount of EUR -12 million).
ENGIE develops its businesses (power, natural gas, energy services) around a model based on responsible growth to take on the major challenges of energy’s transition to a low-carbon economy: access to sustainable energy, climate-change mitigation and adaptation and the rational use of resources. The Group provides individuals, cities and businesses with highly efficient and innovative solutions largely based on its expertise in four key sectors: renewable energy, energy efficiency, liquefied natural gas and digital technology. ENGIE employs 154,950 people worldwide and achieved revenues of €69.9 billion in 2015. The Group is listed on the Paris and Brussels stock exchanges (ENGI) and is represented in the main international indices: CAC 40, BEL 20, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI Europe, DJSI World, DJSI Europe and Euronext Vigeo (Eurozone 120, Europe 120 and France 20).