Enagas: modest results (NAP +2%) but slightly above the consensus

Enagas

The company has presented its results for the first nine months. These are the main figures: Total income 884 M€ (-1.3%), EBITDA in book value 767 M€ (+6.9%). Net Annual Profit 333 M€ (+2.3%), Operational Cash Flow 775 M€ (+17) and Net Debt 4.234 Bn€ (vs 3.623 Bn€ in December 2018).

In the opinion of Bankinter´s analysts, there is a modest advance in Net Annual Profits (+2%), although lightly above forecasts and the evolution in the first quarter (-2.0%). The main surprise has been a greater than expected contribution from international subsidiaries, favoured too by the strength of the dollar.

Main trends in the results: (i) Stable regulated income. The gas transportation network does not need additional investment and the regulated asset base (RAB) has reduced; (ii) Greater contribution from non regulated subsidiaries (Quintero in Chile, TGP in Peru, Tallgrass in the US). The contribution by companies in which it has a holding increased in book value 42% and already represents around 30% of the group´s results compared to 20% a year ago. (iii) The operational cash flow has advanced thanks to the good evolution of operating capital; (iv) Sharp increase in investment through the acquisition of Tallgrass Energy (705 M€) in the US.

However, the principle focus of attention in the presentation of results will be the management team´s declarations about the revision of regulation for the period 2021-2026. The regulator´s (CNMC) initial proposal includes a cut of -22% in the average annual remuneration for the regulatory period 2021-2026. This would mean a cut of 450 M€ in Enagas´ regulated income for this period to around 700 M€ in 2026. This cut is very significant as Enagas´s regulated EBITDA will reach 835 M€ in 2019. Enagas´ future dividends will be affected by this cut in regulated income. The regulator´s final proposal should be published in November.