(Updated with conference call, stock price)
by Benjamin Mallett
PARIS, May 17 (Reuters) – Engie ENGIE.PA announced on Tuesday that it has reduced its exposure to Russian gas by adapting its hedging operations and has revised its annual objectives upwards, after having benefited in the first quarter from energy prices very high against the background of the war in Ukraine.
On the Paris Stock Exchange, the Engie share gained 5.2% around 07:05 GMT, the largest increase in the CAC 40 index, which advanced by 0.7%.
The leading gas supplier in France has indicated that it has reached an agreement with Gazprom on a mechanism, which is being put in place, allowing it to meet its payment obligations for Russian gas – while Moscow now requires that it or ultimately realized in rubles -, while avoiding currency risk.
Engie recalled that most of its gas purchases and sales were made at market prices or under contracts where the price is hedged at signature, its exposure to price increases being limited to short-term deliveries which are fixed one month in advance.
“With regard to the volumes delivered by Gazprom, the direct exposure is at most 15 TWh (terawatt-hours),” he said in a press release.
“In an ordinary context, Engie would have fully hedged this position on the market. However, given the current context of supply disruption risk, Engie has adapted its hedging strategy in order to proactively manage this exposure, which end of March, was reduced to just under 5 TWh,” the group added.
Engie, which did not give details on the new device to pay for Russian gas, however stressed that the new measures were in line with the framework of European sanctions against Russia and did not modify for him “the risk balance”.
“The system is now more or less finalized (…). We have agreed on a solution which is visibly in line with both Gazprom’s expectations, our expectations in terms of no currency exposure , and finally in line with what we understand about European sanctions. All of that is coming together,” its chief executive, Catherine MacGregor, said in a conference call with reporters.
“We followed the process that other competitors or other energy players follow (…)”, she also indicated.
Italy’s Eni ENI.MI will open bank accounts to pay for Russian gas this week after obtaining clarification from the European Union that such a move would not violate sanctions, two sources said on Monday. nL5N2X85ZI
After having reassessed energy prices for the rest of the year, Engie has also raised its objectives for 2022 and in particular now anticipates a net recurring result, group share of between 3.8 and 4.4 billion euros. euros (against 3.1 to 3.3 billion previously).
The gas and electricity supplier, which focuses on renewable energies, decentralized energy infrastructures and even “green” gas, recorded an Ebitda of 4.6 billion euros for the first quarter (+ 49.0%) and a turnover of 25.6 billion (+85.0%).
However, it saw its operating cash flow stand at -100 million euros, recording a drop of 1.7 billion compared to the first quarter of 2021, of which 500 million is explained by the impact of price shields in France.
(Report Benjamin Mallet, with Myriam Rivet and Laetitia Volga, edited by Jean-Stéphane Brosse)