Financial information 1st quarter 2014
- Performance impacted by an exceptionally mild winter in Europe
- + 5.9% organic growth in Current Operating Income1, excluding weather and tariff effects in France
- Further reduction in net debt
- Annual targets confirmed
Revenues at March 31, 2014 were EUR 22,818 million, down -5.9% on a gross basis and -4.8% on an organic basis. The decrease on an organic basis is mainly explained by the unfavorable impact of weather on natural gas sales (1st quarter 2014 was very mild in Europe and particularly in France while the 1st quarter 2013 had been particularly cold).
EBITDA1 for the period was EUR 4,225 million, down -15.6% on a gross basis and -11.5% on an organic basis versus 1st quarter 2013. Excluding the impact of weather in France and the tariff adjustment booked in 2013, which together account for a negative variation of EUR 545 million, EBITDA was stable on an organic basis compared with 1st quarter 2013. In line with the Group’s annual indications, it benefitted from efforts under the Perform 2015 action plan and from the continued expansion of the Group in renewable energies and in fast growing markets, with the commissioning of new assets and of new exploration & production fields. It continued to suffer, however, from lower power market prices in Europe, as expected, and it compares to a particularly favorable 1st quarter 2013 in power generation in Brazil.
Current operating income1 reached EUR 3,130 million, -14.8% on a gross basis and -10.4% on an organic basis compared with the end of March 2013. Excluding the impact of weather in France and the tariff adjustment booked in 2013, current operating income is growing +5.9% on an organic basis, in line with the Group’s annual indications.
At March 31, 2014, net debt was EUR 26.7 billion, down EUR 2.5 billion from year-end 2013 out of which EUR 0.9 billion resulting from positive impact on working capital due to weather in France and includes notably for the period:
- EUR 3.3 billion of Cash Flow from Operations (equivalent to EUR 2.9 billion of free cash flow),
- EUR 1.4 billion of gross capex.
The net debt/Ebitda ratio was 2.18x far below the target ≤2.5x. At the end of March 2014, the Group posted a high level of liquidity at EUR 18.5 billion, which included EUR 10.5 billion in cash. In early April, GDF SUEZ signed a EUR 5 billion 5-year multi-currency credit line with 25 banks, including two 1-year extension options, to refinance two undrawn credit lines maturing in 2014 and 2015. At 3.22%, the Group’s average cost of gross debt continues to decrease, reflecting full year impact of measures taken in 2013.
Group’s performances for the first quarter 2014 are in line with the expected trajectory for 2014 and therefore the Group is able to confirm its financial targets3:
- net recurring income Group share4 between EUR 3.3 and 3.7 billion, assuming average weather conditions and no significant regulatory changes. This target is based on an estimated Ebitda of between EUR 12.3 and 13.3 billion;
- net capex between EUR 6 and 8 billion;
- a net debt/EBITDA ratio less than or equal to 2.5x and an “A” category rating;
- a 2014 dividend with a 65-75% payout5, with a minimum of 1 euro per share, payable in cash. As a reminder, the Group maintained the 2013 dividend at 1.5 euro per share.
Significant events during the period
The Group successfully implemented its strategy focused on two objectives:
To be the benchmark energy player in fast growing markets
- Authorization to export LNG from the Cameron LNG project in the U.S. in which GDF SUEZ holds a 16.6% stake and 4 million tons per annum (mtpa) of liquefaction capacity;
- Signing of a 20-year sales contract with the Taiwanese company CPC covering 0.8 mtpa of LNG from Cameron LNG project;
- In Oman, inauguration of the Sohar 2 and Barka 3 power plants with total installed capacity of 1,488 MW;
- In Mexico, signing of a memorandum of understanding and cooperation with PEMEX to promote the development of energy projects;
- In Brazil, commercial operation of 5×75 MW of hydro (Jirau) and 115 MW of wind (Trairi) capacities;
- In Uruguay, chartering of the world’s largest floating storage and regasification terminal in connection with the GNL del Plata project;
- In Chile, LNG storage installations optimization in Mejillones terminal;
- In China, signing of a major cooperation agreement with Beijing Enterprise Group to develop energy projects in China and promote development of sustainable urban eco-districts;
- Commissioning of Amstel (Netherlands), Juliet (UK) and Gudrun (Norway) E&P fields.
To be leader in the energy transition in Europe
- Acquisition in the United Kingdom of wind energy developer West Coast Energy;
- In France, GDF SUEZ has been selected for 10 photovoltaic solar projects totaling 53.35 MWc;
- Contract awarded for the manufacture of future Gazpar smart meters;
- Promising development of biomethane injection in the French natural gas grid and 4 sites connected as of today;
- Renewal of heating networks contracts in France : Saint-Denis, Massy/Antony and Rennes.
In addition, proposal by the Magritte Group, gathering 11 of the largest European energy utilities on the Group’s initiative, of nine recommendations to reform Europe’s energy and climate policy in order to achieve three main objectives: competitiveness, sustainability and security of supply. In France, new decree on gas storage obligations constitutes a first step towards improvement of security of supply.
Revenues decreased -5.9% on a gross basis, due to a EUR +50 million scope effect (EUR -180 million for disposals and EUR +230 million for acquisitions, notably the Balfour Beatty Workplace acquisition in the U.K.) and EUR -330 million due to exchange rate fluctuations, mainly the Brazilian real, the Australian dollar and the US dollar. Revenues decreased -4.8% on an organic basis.
*The Energy International Business Line has been reorganized into 5 regions versus 6 previously. The Asia-Pacific region now includes Australia, which previously formed a region, but no longer includes Pakistan, which is now part of the South Asia, Middle East & Africa region; Turkey is incorporated in the UK and other Europe region. Figures at 03/31/2013 have been restated to reflect this new organization.
Energy International business line revenues, at EUR 3,568 million, show a gross decrease of -7.4% and organic growth of +3.0%. These changes reflect, on the one hand the impact of the asset optimization program (EUR -141 million) and exchange rate fluctuations (EUR -249 million arising from the Euro appreciation against all main currencies) and on the other hand the organic growth from the commissioning of new power plants in Latin America and increased electricity prices, mainly in Brazil and North America.
Revenues for the Latin America region, which totaled EUR 933 million, were down -1.4% on a gross basis mainly due to the depreciation of the Brazilian real, while growing by +12.3% on an organic basis.
In Brazil, increased sales resulted from an increase in average sales prices due mainly to inflation indexation and the progressive startup of the Trairi wind farm (115 MW). Nevertheless, these increase in sales prices did not entirely offset higher energy purchase costs during the period.
The Group’s activity in Peru expanded thanks to the commissioning of the Ilo thermal power plant (560 MW) in June 2013 and to increased customer demand. In Chile, a slight increase in revenues resulted from higher prices.
Revenues for the region came to EUR 663 million, a decrease of -14.5% on a gross basis and a -2.5% decrease organically. This decline was due mainly to electricity production activities in Australia that suffered from reduced demand and lower availability, partially offset by an increase in sales to industrial customers in Thailand and good performance of the retail activity in Australia.
Revenues for the North America region totaled EUR 995 million, up +3.8% on a gross basis and +17.8% organically, thanks in particular to the good operating performance of electricity production assets in the United States due to very cold weather conditions early 2014 and to higher average sales prices on the retail electricity market in the United States.
UNITED KINGDOM AND OTHER EUROPE
Revenues for the region totaled EUR 840 million, representing a -19.4% reduction on a gross basis, due mainly to the portfolio optimization program in continental Europe, and a -14.0% decrease on an organic basis related to reduced volumes in the U.K.
SOUTH ASIA, MIDDLE EAST & AFRICA
Revenues for the region totaled EUR 137 million, showing a +5.6% increase on a gross basis and a +7.5% increase organically. This growth is related to increased revenues from operation and maintenance activities for new power plants in Oman (Barka 3 and Sohar 2) and in Saudi Arabia (Riyadh IPP). The gross increase also reflects the acquisition last December of Meenakshi in India (300 MW), partly offset by the partial disposal of Sohar.
Revenues for the Energy Europe Business Line amounted to EUR 12,711 million, down -9.7% on a gross basis. This decrease is explained mainly by the impact of weather conditions on gas sales (1st quarter 2014 having been particularly mild, while 1st quarter 2013 had been particularly cold) and by the tariff adjustment in France related to 2011 and 2012 and recorded in 2013.
At the end of March 2014, CWE France revenues reached EUR 5,260 million, down by -27.3% compared with the end of March 2013, mainly due to the difference in weather conditions between 2013 and 2014 and to the tariff adjustment related to 2011 and 2012.
Natural gas sales were down, impacted by a mild winter (-10.7 TWh), while in 2013 the winter had been very cold (+13.2 TWh); lower sales were also due to reduced energy consumption and competitive pressure. GDF SUEZ retains a market share of approximately 82% on the retail market and of about 50% on the B2B market.
Electricity sales improved thanks to growth in sales to final customers, and despite lower power production by gas-fired plants, partially compensated by increased wind and hydro power production thanks to favorable 1st quarter 2014 wind and hydrology conditions.
CWE BENELUX – GERMANY
Revenues for CWE Benelux – Germany were EUR 3,087 million, down -18.9% from 2013. Electricity volumes sold were lower due to the impact of a fall-off of sales to customers in Belgium and to fewer market sales, despite higher electricity production than in 2013 because the two power plants, Doel 3 and Tihange 2, which had been shut down during the entire 1st quarter of 2013 were in operation throughout 1st quarter 2014 until March 25, 2014.
In Belgium and Luxembourg, electricity sales were down mainly due to lower sales on the wholesale market and erosion of market shares in 2013. Market share in Belgium on the retail market has stabilized at approximately 50% since the 2nd quarter of 2013. In the Netherlands, electricity sales were also lower, while in Germany they were slightly higher.
Natural gas sales volumes were down due to unfavorable weather conditions in 2014, while weather conditions had been favorable in 2013, and due to a declining market share in 2013 which however has stabilized around 45% in Belgium over the past six months.
SOUTHERN & EASTERN EUROPE
The Southern & Eastern Europe region saw a -14.9% decline in revenues due mainly to the decrease in gas sales and power production in Italy.
Contributory revenues at March 31, 2014 came to EUR 1,660 million, for a gross increase of +4.7% compared with the end of March 2013, and an organic increase of +7.8%.
The change in contributory revenues is explained by:
- increased LNG activity, with a strong arbitrage activity early 2014 in Asia and in Europe reflected by an increase of 5.7 TWh in external sales of LNG, that is 27.4 TWh totaling 34 cargoes at the end of March 2014, versus 21.7 TWh totaling 24 cargoes at the end of March 2013;
- a slight decrease in contributory hydrocarbon production (11.2 Million Barrels of Oil Equivalent (Mboe) at the end of March 2014 vs. 11.6 Mboe at the end of March 2013) due to a temporary outage in the Njord field in Norway.
Total hydrocarbon production at the end of March 2014 fell 0.5 Mboe to 12.7 Mboe versus 13.2 Mboe at the end of March 2013. For the year, the level of hydrocarbon production will benefit from the recent commissioning of the Amstel (Netherlands), Juliet (UK) and Gudrun (Norway) fields.
Total revenues of the Infrastructures business line, including intra-Group revenues, came to EUR 2,087 million, a decrease of -3.4% compared with the same period in 2013, as a result of:
- a reduction in volumes distributed by GrDF due to warmer weather conditions in 2014 than in 2013 (-31.3 TWh),
- lower sales of storage capacity in France,
and despite the annual adjustment of distribution infrastructure tariff (+4.1% on July 1, 2013) and of the transmission infrastructure tariff (+8.3% on April 1, 2013) in France.
In the same weather and regulatory context, contributory revenues reached EUR 900 million, up +13%. This growth reflects:
- development of transmission, storage and terminalling activities for third parties following continued market liberalization;
- increase in the gas purchase-sale operations to maintain the technical performance of storages.
Energy Services business line revenues progressed to EUR 3,979 million at March 31, 2014, up +1.1%, supported by the acquisition at the end of 2013 of Balfour Beatty Workplace in the United Kingdom.
On an organic basis, revenues were down -3.4%, which can be explained, in particular, by the unfavorable effects of the mild weather and the last impacts of the expiration of cogeneration contracts in France and Italy following the end of compulsory programs to purchase electricity generated by these facilities.
These factors were partially offset by the increase in installations activities in France and Benelux, in particular in the electrical and climate engineering activities.
The March 31, 2014 results presentation used during the investor conference call will be available to download from the Group’s website:
- May 6, 2014 : Final dividend payment6 (EUR 0.67 per share) for fiscal year 2013. Ex-dividend date is April 30, 2014
- July 31, 2014 : Publication of first-half 2014 results
- October 15, 20147 : Interim dividend payment of EUR 0.50 per share for fiscal year 2014; ex-dividend date is October 13, 2014
1 Including share in net income of associates; new definition of EBITDA
2 Impact of EUR 545 millions on EBITDA and Current Operating Income, impact on revenues is estimated at EUR 1.2 billion
3 These targets assume average weather conditions, no significant regulatory or macro economic changes, commodity price assumptions based on market conditions as of end December 2013 for the non-hedged portion of production, and average foreign exchange rates for 2014 as follows: €/$1.38, €/BRL 3.38. No change of assumptions for Doel 3 and Tihange 2 plants ; restart after the results of the tests expected mid June 2014.
4 Net income excluding restructuring costs, impairments, disposals, other non-recurring items and related tax impacts and nuclear contribution in Belgium.
5 Based on net recurring income, Group share.
6 Subject to implementation of the new settlement/delivery rule in France anticipated for October 6, 2014. In compliance with current rules, postponement of this reform would delay the payment date to October 16, 2014, instead of October 15, 2014.
7 Dividend subject to the vote of shareholders at the April 28, 2014 General Meeting.
8 Including share in net income of associates.
The figures presented here are those customarily used and communicated to the markets by GDF SUEZ. This message includes forward-looking information and statements. Such statements include financial projections and estimates, the assumptions on which they are based, as well as statements about projects, objectives and expectations regarding future operations, profits, or services, or future performance. Although GDF SUEZ management believes that these forward-looking statements are reasonable, investors and GDF SUEZ shareholders should be aware that such forward-looking information and statements are subject to many risks and uncertainties that are generally difficult to predict and beyond the control of GDF SUEZ, and may cause results and developments to differ significantly from those expressed, implied or predicted in the forward-looking statements or information. Such risks include those explained or identified in the public documents filed by GDF SUEZ with the French Financial Markets Authority (AMF), including those listed in the “Risk Factors” section of the GDF SUEZ reference document filed with the AMF on March 20, 2014 (under number D.14-0176). Investors and GDF SUEZ shareholders should note that if some or all of these risks are realized they may have a significant unfavorable impact on GDF SUEZ.
GDF SUEZ develops its businesses (power, natural gas, energy services) around a model based on responsible growth to take up today’s major energy and environmental challenges: meeting energy needs, ensuring the security of supply, fighting against climate change and maximizing the use of resources. The Group provides highly efficient and innovative solutions to individuals, cities and businesses by relying on diversified gas-supply sources, flexible and low-emission power generation as well as unique expertise in four key sectors: independent power production, liquefied natural gas, renewable energy and energy efficiency services.GDF SUEZ employs 147,200 people worldwide and achieved revenues of €81,3 billion in 2013. The Group is listed on the Paris, Brussels and Luxembourg stock exchanges and is represented in the main international indices: CAC 40, BEL 20, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI Europe and Euronext Vigeo (World 120, Eurozone 120, Europe 120 and France 20).