June 11, 2020 / 4:06 PM / a month ago

UPDATE 1-Italgas sees higher earnings as digital drive offsets pandemic

(Recasts, adds CEO comments)

MILAN, June 11 (Reuters) - Italy’s biggest gas distributor Italgas said on Thursday that its core earnings could rise by as much as 8% this year as its digitalisation drive improves efficiency and mitigates the impact of the coronavirus pandemic.

Italy was one of the countries hardest hit by COVID-19 and there was some concern about the risks for key energy facilities should the crisis persist.

“Our digital new technology has been extremely useful... we are working very well, with no problems,” Chief Executive Paolo Gallo said on a call with analysts on guidance for the year.

Like other utilities Italgas has increased spending on digital networks to run its grids more efficiently and offer clients services such as remote gas meter readings and gas leakage detection.

The state-backed group said it expected its core earnings this year to be in a range of 960-980 million euros ($1.09-1.11 billion) compared to 907.5 million euros last year while sales would be more than 1.3 billion euros from 1.258 billion euros.

Last year Italgas completed the acquisition of regional utility Toscana Energia which in 2018 had sales of 148 million euros and core earnings of 104 million euros.

“Our balance sheet is solid and there has been no deterioration regarding access to capital markets,” Gallo said.

Investments this year will be less than expected due to the two months of lockdown in Italy but spending will be significantly higher in 2021 as the group develops newly acquired assets.

“I assume there will be significant additional M&A by year end,” the CEO added.

Italgas, which manages 66,000 km of regulated domestic gas pipelines, is mainly focused on Italy where it is keen to grow by acquiring smaller rivals or winning gas distribution tenders.

However, it was recently included in the shortlist to buy Greece’s state-controlled gas distribution network DEPA Infrastructure. Gallo said he expected a winner to be announced by the end of the year.

At 1521 GMT, Italgas shares closed down 1.7% while the European utility index dropped 3.2%.

$1 = 0.8792 euros Reporting by Stephen Jewkes; editing by David Evans and Susan Fenton

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