2023-07-28 18:47:27
Engie recorded a net loss of 800 million euros due to an exceptional charge of 4.4 billion linked to the future management of Belgian nuclear waste. rafapress / Rafael Henrique – stock.adobe.co
The group posted strong growth in its operating results, driven by this division and energy management.
Renewables were the most dynamic branch of Engie in the first half of 2023, with a surge in operating income of 43% like-for-like. It now weighs very heavily in the accounts of the energy company, since it represents nearly 18% of the group’s operating profit over the first six months of the year. This surge is explained by an increase in volumes and favorable prices for hydroelectric power from dams. In addition to these dams, the group is also present in solar, land-based and maritime wind energy. Most of the growth in the future will come from these last three elements, given the scale of the projects.
Currently, concerns are emerging about the strength of activity in wind power. Last week, the Swedish company Vattenfall gave up building a large offshore wind farm off the coast of the United Kingdom. Wind farm operators are subject to a scissors effect which reduces the profitability of projects. To win, they must offer a buy-back price for the electricity produced, which has been falling steadily in recent years. On the other hand, the surge in the cost of raw materials in recent months has increased their costs. Vattenfall had won the abandoned field in July 2022. But the conditions have changed enough to make it give up a year later.
Acquisition projects
Not enough, however, to slow down Engie’s ambitions in the field. The energy company has, at the end of June, 6.6 gigawatts (GW) of projects under construction. “We are therefore still very confident in our ability to achieve our annual objective of adding 4 GW of renewable capacity on average. “, until 2025, before 6 GW over 2026-2030, declared Catherine MacGregor, the director general of Engie. Over the half-year, installed renewable production capacity accounted for 39% of Engie’s total capacity. In 2019, it was only 28%. And the objective remains to reach 58% by 2030. To achieve this, the energy company aims to increase its renewable capacities by 4 GW on average each year until 2025.
The energy management business benefited from an environment still characterized by high energy price volatility
Catherine MacGregor, CEO of Engie
This objective is supported by a pipeline of projects which reached 85 GW at the end of June 2023. But this development also involves acquisitions. What Engie did over the semester with the South African BTE Renewables, which brings an additional capacity of 340 MW of renewable energies and a portfolio of more than 3 GW of projects in advanced development. In addition to renewables, it is the “global energy management & sales” activity (Gems), which deals with energy management and trading, which has driven Engie’s results. It generated operating income of 3.1 billion euros over the first six months of the year, against just over 1 billion over the same period of the previous year. This activity benefited from a “context still characterized by high energy price volatility”a reconnu Catherine MacGregor.
“Very good financial performance”
Enough to allow the Director General to congratulate herself on “the very good financial performance achieved in the first half”. Engie generated a turnover of 47 billion euros, up 8.9% over one year. And the operating result as a whole shows an even stronger increase, of 32.3%, to 6.9 billion euros. However, this performance should not be repeated in the second half, due to the “market normalization”with less volatility, which will weigh on the results of the Gems branch, but also a drop in prices in renewables. “We expect a decline in the second half compared to last year”recognized Pierre-François Riolacci, deputy general manager finance of the energy company.
Engie’s operational performance is very good. On the other hand, its net result shows a loss of 800 million euros. In question, a provision of 4.4 billion euros linked to the extension of the last two nuclear power plants in Belgium until 2036. After long negotiations, the Belgian government and Engie have reached an agreement on all the points related to this extension. A joint venture will be created to operate these plants, which will restart in November 2025.
Above all, the two parties have agreed on the cost of processing nuclear waste and that of dismantling seven power plants. The 4.4 billion provisioned correspond to these costs. For Engie, the good news comes mainly from the fact that this agreement allows it to definitively settle this nuclear risk.
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