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

EnagasEnagas signs cooperation accord with Albania's AlbGaz

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.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.