Engie said to mull GRTgaz stake sale if tariff plan won’t change
December 01 2019 09:56 PM
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The headquarter offices of Engie (centre), stands illuminated with other skyscrapers in La Defense business district in Paris. Some of Engie’s board members and shareholders will push the company to sell as much as 50% of its holding in GRTgaz if the Commission de Regulation de l’Energie doesn’t raise its proposal for 2020 to 2023 gas-transmission tariffs, a source said.

Bloomberg/ Paris

Engie SA will consider selling most of its 75% stake in France’s largest gas-transmission operator if the energy regulator sticks to an unsatisfactory tariff proposal currently under discussion, people familiar with the matter said.
Some of Engie’s board members and shareholders will push the company to sell as much as 50% of its holding in GRTgaz if the Commission de Regulation de l’Energie doesn’t raise its proposal for 2020 to 2023 gas-transmission tariffs, said one person, who asked not to be identified because the information is private. 
Engie will consider selling that stake if GRTgaz’s return on investment becomes insufficient, another person said.
Engie chief executive officer Isabelle Kocher is under pressure to revive earnings that stagnated between 2015 and 2018. The French company may consider bringing European gas-transmission operators into GRTgaz or build partnerships with rivals from neighbouring countries to “optimise” grids, Kocher has said on several occasions this year.
While tough talks between energy watchdogs and owners of regulated entities over tariffs are common, they come as Kocher is trying to convince investors that her shift away from fossil fuels and her push into clean power and energy-efficiency services is paying off. Her mandate as CEO is up for renewal next year.
In February, she warned that the group’s networks division, which mostly consists of GRTgaz and other regulated gas-distribution and storage assets in France, would see a drop in operating income by 2021 amid tariff reviews.
The network division’s current operating income, which accounted for 45% of group operating earnings in 2018, will fall to between €2bn ($2.2bn) and €2.2bn in 2021, down from €2.3bn last year, Engie said in February. 
To revamp the business’s prospects, Engie took control of a giant gas pipeline company in Brazil in June. GRTgaz’s tentative talks to team up with rival operators haven’t progressed so far, one person said. 
The French regulator’s proposal means that Engie’s return on GRTgaz would be lower than what investors expect from a listed company, while the regulated gas-transmission unit might still appeal to some funds and financial institutions, the people said.
In 2011, French state-owned financial institution Caisse des Depots et Consignations and CNP Assurances bought a 25% stake in GRTgaz for €1.1bn. The French government has recently passed a law that allows Engie, CDC and CNP to hold as little as 50% in the gas-transmission company.
The energy watchdog is underestimating GRTgaz’s operating costs, and wrongly assuming that Engie can permanently refinance all its debt to reflect falling interest rates, the people also said.
The Commission de Regulation de l’Energie is due to publish gas-transmission tariffs for the four years starting April 2020 in the coming weeks.



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