(News Bulletin 247) – The energy group has raised its net recurring profit and operating profit target for the current financial year thanks to the performance of its GEMS (Global Energy Management & Sales) divisions.

While the results season will be in full swing at the end of July, several groups are already telling the market that their business performance is better than expected. This just before the “quiet period”, a period during which companies do not communicate with investors before the publication of results.

After Renault on Thursday, it is the turn of the energy group Engie to announce this Friday an increase in its objectives for the 2023 financial year. figure between 4.7 billion and 5.3 billion euros, whereas the company previously expected to reach the top of a range between 3.4 billion and 4 billion euros.

In addition, operating income (Ebit) excluding nuclear-related costs is now expected to be between 8.5 billion and 9.5 billion euros, against the top of a range between 6.6 billion and 7.6 billion euros. euros previously.

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A dynamic “B2B”

Engie explains that this increase in outlook is mainly due to the solid performance of its GEMS (Global Energy Management & Sales) division, its energy asset trading, supply and risk management division. For example, the company establishes long-term purchase contracts for its professional clients and/or develops cost of risk strategies for them. This division was last year the largest contributor to the company’s turnover, with revenues of 45.14 billion euros, as well as operating profit (2.6 billion euros).

The company explains in particular that it benefited from a good performance of its “B2B” activities (for businesses), “in a market context which allows the full valuation of the cost of risk”. Faced with a tense market with counterparty risks, companies therefore rely on the group’s expertise to manage these risks, which allows Engie to have a favorable price environment.

The GEMS activity is also supported by “the gradual normalization of market conditions which imply the continuation of reversals of market reserves (a form of reversal of provisions to simplify, editor’s note)”, as well as a good performance of its activity energy management in Europe, which is driven by good market conditions, although less favorable than those of last year.

The company added that its other businesses were progressing in line with its expectations. Its half-year results will be published on July 28.

A Belgian nuclear agreement that gives visibility

On the Paris Stock Exchange, the Engie share rose 1.4%, marking one of the strongest increases in the CAC 40. The stock thus continued to rise, after having already gained more than 4% the day before, thanks to the agreement established with Belgium on the extension of two nuclear reactors.

The law of January 2003 in Belgium provides for the exit from nuclear power with the end of operation of the seven Engie reactors by 2025. But, at the beginning of 2022, the war in Ukraine and its consequences pushed Brussels to review its copy.

Engie, via its subsidiary Electrabel, will thus extend the operation of the Doel 4 and Tihange 3 reactors by ten years, with a restart planned for November 2026 or even November 2025 provided that the regulatory relaxation announced by Belgium is implemented.

The agreement also includes the creation of a legal structure dedicated to the two extended nuclear reactors, owned equally by the Belgian State and Engie, as well as a “balanced distribution of risks” notably through a mechanism known as a “Contract for difference” and an incentive for the operator to “good technical and economic performance of the facilities”.

Above all, the terms set a lump sum of 15 billion euros payable by Engie for the cost of nuclear waste on all power plants in the country.

This agreement has the advantage of giving a fixed and known cost to the group without exposing it to possible new revisions. A kind of balance of any account.

23 billion Belgian nuclear liabilities

“Thanks to the transfer of all the obligations related to nuclear waste to the Belgian government, the Engie group will no longer be exposed to the evolution of future costs related to the treatment of waste reviewed every three years by the Nuclear Provisions Commission”, explains the company in a press release.

However, Engie will include in its accounts for the 2023 financial year a charge of 4.5 billion before tax linked to the increase in its commitments under this agreement. This charge will be charged to non-recurring net income, and will increase the company’s economic net debt.

In total, Engie’s total liabilities in Belgian nuclear power amount to 23 billion euros, including the costs of nuclear waste, therefore, and also the provisions for the cost of dismantling Belgian power plants.

“The deal removes a major risk to the stock, although it involves paying a significant premium to the book value of its nuclear provisions,” Deutsche Bank said in a note.

UBS considers for its part that this is a “clearly positive” announcement for the action, even though the charge of 4.5 billion euros turns out to be higher than that which it anticipated, by 3 Billions of Euro’s. This because this amount “is at the bottom of the range recently announced in the press, and should be offset by substantial tax savings”, develops the Swiss bank.