March 8, 2018 / 10:34 AM / 12 days ago

Engie shares rise on dividend surprise and bullish outlook

PARIS (Reuters) - French gas and power group Engie (ENGIE.PA) said a three-year transformation plan was completed ahead of schedule and surprised the market with a higher than expected dividend as it returned to profit after two years of losses.

FILE PHOTO: Isabelle Kocher, Chief Exective Officer of French gas and power group Engie, attends the group shareholders general meeting in Paris, France, May 3, 2016. REUTERS/Benoit Tessier /File Photo

Engie committed to pay a 0.75 euro dividend for its current 2018 fiscal year, up from 0.70 euros for 2017 and beating forecasts for an unchanged 2018 dividend - causing Engie shares to surge more than 5 percent.

Utilities’ dividends are closely watched by investors who typically buy these stocks because of their relatively high and steady returns, and high cash flows.

“We have completed our three-year transformation plan earlier than expected, therefore we will boost our dividend,” Engie chief executive CEO Isabelle Kocher said.

Kocher has lead a move away from fossil-fuel based power generation and into renewables, grids and energy services.

She said the shift had turned Engie into a less risky, cleaner and more profitable company, with 89 percent of core earnings now coming from contracted or regulated activities from 70 percent in 2015. Low-carbon activities now account for 91 percent of its portfolio from 75 percent three years ago.

FILE PHOTO: The Engie logo is pictured on working helmets during a press visit at Engie windfarm in Radenac in Brittany, France, October 3, 2017. REUTERS/Stephane Mahe/File Photo


Kocher said Engie had now completed 13.2 billion euros (11.78 billion pounds) worth of asset sales as part of a 15 billion plan and that the sales process had been launched for the remainder.

As for reinvestment of the proceeds, Engie has invested in or committed to a total of 14.3 billion euros in new activities.

Engie CFO Judith Hartmann told Reuters that about 2.5 billion of this amount had been spent on acquisitions of new businesses such as French solar firm Solairedirect and Dubai air-conditioning firm Tabreed. The rest was mainly invested in existing activities to boost organic growth.

    Asked about Engie’s interest in buying into German peer Innogy (IGY.DE), Kocher said Engie is not considering any major acquisitions and is focusing on organic growth, although she did not rule out smaller acquisitions.

    She also reiterated Engie is happy with its current 32.6 percent stake in waste and water firm Suez. (SEVI.PA)

    Engie’s 2017 revenue rose 0.3 percent to 65 billion euros ($80.6 billion). Engie’s revenue had risen high as 97 billion euros in 2012, but it has since shrunk due to debt-reduction and restructuring plans.

    Core earnings fell 1.8 percent to 9.3 billion euros and the firm swung into a net profit of 1.4 billion euros, reversing a 400 million euro loss.

    For 2018, Engie aims for 2.45-2.65 billion euros net recurring income and core earnings of 9.3 to 9.7 billion.

    Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta/Keith Weir

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