FY2022: Strong earnings from gas enable higher investment in renewables

Unsurprisingly Engie delivered a strong operational and financial performance in 2022, benefitting from unprecedented commodity market prices and volatility, pushing the earnings from GEMS, thermal and renewables to exceptional levels. These record results set the group on the right track for 2023 and put it in a strong position to invest in renewables but also propose an exceptional dividend. Despite a complicated and costly Belgian nuclear dismantling, the group managed to retain a relevant fi

Q3 22: Excellent results lead to upgraded FY2022 guidance

The major French utility delivered a very impressive performance for this third quarter 2022, with a 49% rise in EBITDA to €10.7bn, driven by strong trading activities through the GEMS division but also by growth in the thermal and supply business units, and in renewables. Engie confirmed its winning position in a highly-volatile energy market environment and its commitment to playing a leading role to support the security of supply in Europe. The guidance for FY2022 was upgraded.

H1 22: another astonishing release, but this time guidance is confirmed

Engie released a very strong set of results, with EBITDA surging by more than 43% and net income multiplying by 2.5x. No doubt on the drivers: the trading desk and nuclear generation have become cash cows. The rather conservative guidance was however confirmed. The group also reduced its exposure to Gazprom and Russian gas, while it engaged in manoeuvres to keep the threat of windfall taxes at bay as far as possible.

Q1 22: confirmation of what the market expected, and even more

Engie released a set of very strong Q1 22 results, above expectations, driven by its thermal, nuclear and trading activities. As a result, the guidance is improved by more than 20% on the back of more realistic assumptions thus correcting the black spot in the FY21 results. The lower exposure to Russian gas is also worthy of note to reassure investors and to bring some confidence back into an over-sanctioned stock for several months. More than ever, Buy.

FY21: strong nuke, solid guidance, weak assumptions

Engie beat our expectations on the FY21 results driven by the remarkable performance of its nuclear assets. While some might think of this as a one-off, the group has confirmed with a set of solid targets for 2022-24, paving the way for continuous growth after turning the page on nuke and Equans, even if conservative assumptions leave room for upside. Note, however, a slight disappointment in the dividend, with €0.85 proposed vs €0.90 expected, and net debt affected by margin calls.

9M21: Equans, better guidance, Eolia… what are you waiting to buy ?

Engie released a very strong set of 9M 21 results and, for the second time in a row, upgraded its FY21 guidance substantially. After the sale of Equans at a very interesting price, the group also announced the purchase of Eolia, a Spanish renewables pure play with 0.9GW of operating assets, with Crédit Agricole (40%/60%). More than ever, Engie confirms the attractiveness of its investment case by operating its strategic revamping in a very efficient way. Positive recommendation reaffirmed.

Nuke optionality

What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.

H1 21: targets upgraded as profits soared

Driven by nuclear power, weather-related demand and the increase in power prices, Engie released a set of strong H1 figures. EBIT is up by 44.4% in organic terms, while group recurring net profit jumped by 67%. This led to guidance being improved by €200-300m at EBITDA, EBIT and net result levels. The sale of an 11.5% equity stake in GRTgaz will decrease net indebtedness, while the bidding process of Equans is also on track, with further information in H2. Positive recommendation confirmed.

On the difficult but needed road towards the green transition

Expected for months now, Engie finally unveiled its roadmap for the coming years to show its operating organisation and expansion in renewables. This involves €9-10bn of disposals (including Bright) and €15-16bn of investments by 2023 to move towards the successful scheme of a strong expansion in green assets backed by the network cash-cow. A promising move, midway between the merciless capacity-driven utility race and the cautiousness that such a strategy requires. Positive view confirmed.

Europe can thank the weather, the Americas cursed it

A solid start to the year from Engie. Except for Renewables, which were strongly affected by adverse events in the Americas, all activities exhibited growth and drove EBIT up by 10% organically. In particular, the cold weather in Europe increased both energy volumes and prices. FY21 guidance reaffirmed, as much as our positive view.

FY 20 results - in line

FY20 figures were mainly impacted by already known elements: COVID-19-related impact on volumes (€1.2bn at the COI level) and FX fluctuations (€0.4bn), but EBITDA and COI were respectively 3.3% and 5.7% above expectations. However, the proposed dividend of €0.53/share is well below our current model (but roughly in line with the consensus). Even if FY21 guidance is slightly below market expectations, we confirm our positive view – based on the expected growth in renewables.

Q3 20: the beginning of the recovery

The third quarter marks the beginning of the business recovery, although the volatility in FX still impacted the group’s results. In addition, the group is stepping up its reorganisation, both in the CS division and in its holdings in listed companies. We confirm our positive view on this strategy. Buy recommendation confirmed. No substantial changes expected on our model.

Shame on Suez’s board and Parisian inbreeding exposed

The Veolia bid for Suez has exposed again the French penchant for boards of the same feather. The irony is Suez’s poison pill relying on a Dutch stichting under the aegis of some of its board members. This is pushing the envelope too far and makes a mockery of shareholders’ fundamental rights.

The Veolia/Suez merger, finally?

Veolia has made an offer to acquire 29.9% of the Suez share held by Engie at €15.50/share, representing a substantial 50% premium. The two companies are similar concerning their activities and complementary in terms of their geographical footprint, and this transaction will almost double Veolia’s exposure to Asia. From Engie’s point of view, this would be a major step forward in its plan to refocus its activities on gas and the development of renewables.

H1 20 down but in line with expectations

The group was severely impacted during Q2 20, with net income that halved. But the figures are roughly in line with our and the market expectations. However, the FY20 guidance is below market expectations, except for net income. But the most important announcement was the confirmation of rumours about the sale of up to €9bn, mainly services. The group wants to focus on renewables and networks. Positive recommendation confirmed.

Hybridan Small Cap Feast - 21 Feb 23

21 February 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objec

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Hardide Update

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Hybridan Small Cap Feast - 21 Mar 23

21 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv