The unbundling plan involves a share split (each title of the existing Naturgy will become two shares, one in each company), meaning the existing shareholding structure will be replicated exactly in the new companies. However, financial sources predict that this move will be only the first step for a further restructuring. It will allow, through some form of exchange, to arrange for each shareholder to be introduced to the lines of business that best suit each individual’s profile.: Due to Criteria’s strategic structure for Spain, it is more connected to regulated businesses and is easier to become profitable through sales operations or alliances, with funds invested in energy production assets.
“On a strategic level, it makes little sense to split businesses. In a very competitive market, the trend is towards mergers to reduce costs, not the other way around. First of all, fragmentation destroys value because synergies emerge. The importance of operating as a single group,” he emphasizes Renta4 analyst Ángel Pérez. “The operation appears to have internal motivations, as it is easier for some shareholder funds to sell small shares than existing large share packages.”adds the expert.
The biggest obstacle faced by the partition operation was, in any case, the frontal rejection of the central government. The separation requires the express permission of Management, which has clearly and repeatedly demonstrated its opposition to the split into two companies.To the point of causing consternation within Naturgy itself due to the comprehensiveness of the explanations. Teresa Ribera, vice president and minister for the Ecological Transition, emphasized in a speech a few weeks ago that the operation was “not a highly recommended operation” and “probably responds to different reasons, very different from continuing investment in the energy transition.” In an interview with Expansion, he confirms the Government’s persistent denial of the plan since it became known and warns that he will be monitoring its development “very closely”. The Naturgy president’s response was to demand that the Executive have the “freedom” to run the company.
Despite the obvious reluctance of the government and the difficulties that the company will have to overcome, Last July, Naturgy announced a review of its strategic plan through 2025, which includes the reactivation of the Gemini Project.. “The Board confirmed its strategic understanding and called on the team to continue analyzing possible implementation alternatives and their associated timetables,” the group said, acknowledging that it was premature to set a timeframe for implementing the separation, but underlining that: “De facto, the company has regulated and liberalized its operations.” It operates by separating it operationally.
But, Some of the energy company’s existing shareholders acknowledge the difficulty of even moving forward with the unbundling process, given the Government’s outright rejection. Pedro Sánchez – now reissued for another four years – and further note that the current mandate for group management is intended only to analyze the appropriateness of how and when to carry out the separation, but stipulates that final approval of the corporate division will be obtained once the separation has been made. The operation was concluded in detail.
A few months ago, the rating agency Standard & Poor’s said in a report in which it emphasized that the operation had been carried out: “We believe that the possibility of the implementation of the operation has decreased significantly, as it does not receive the necessary support from the current Spanish Government.” I do not foresee any movement in this sense for at least a few years. “The market never gave much confidence to the project, mainly because the Government always remained silent.”Renta 4 analyst summarizes this.
presidential model
Reynés became president in February 2018. He did this with the label of man of the house, a trusted figure of the CriteriaCaixa leadership.. He was the managing director of the LaCaixa Foundation’s own holding company and also the main manager of Abertis, one of its largest investments, where he had already demonstrated his financial vision and ability to add value to the company (a few months after his departure) ACS and closed Atlantia’s takeover bid on the infrastructure group ) and also parts of it (the sale of Abertis Telecom’s telecommunications tower business was the seed for the current giant Cellnex).
Reynés’ arrival represented a change in the company’s management. He assumed the presidency (replacing Criteria’s president, Isidro Fainé), as well as all administrative duties (which by then had been held by outgoing CEO Rafael Villaseca). A model in which all powers are grouped in an executive chairman, which is already rare in large publicly traded companiesBecause it does not comply with the good corporate governance practice models required by international investment funds.
Movements to reverse this situation in NaturgyIt became one of last summer’s corporate soap operas, with major shareholders agreeing on an advanced plan to appoint a number two who would share executive authority with Reynés. The person chosen was Ignacio Gutiérrez-Orrantia, a key figure at the Citi investment bank in Europe; In addition to being a direct advisor to the group and reassuring Reynés, he was also very knowledgeable about the workings of Naturgy. Curiously, the initiative to decentralize executive functions comes just four months after a shareholders’ meeting and after the four major shareholders jointly supported Reynés to remain in office for another four years.
However, the expected CEO signature fell through at the last minute. In mid-July, Orrantia rejected the offer (several sources point to differences in reassignment as the main reason for the debacle) and remained at Citi. For this reason, Naturgy has frozen the process of appointing number two, and although many shareholders believe this will resume at some pointThe fact is that in the wake of the turmoil, the major partners have publicly expressed their support for Reynés, who for now is the sole chairman of the energy company.
Criteria did it first on its own (“Naturgy’s first shareholder, Criteria, confirmed its confidence in the management team led by the company’s chairman) Francisco Reynés and will support his proposals aimed at facing the company’s important challenges in the coming years.“, the holding company in a statement before the board meeting at which the appointment of Orrantia did not take place); then the board unanimously (“all shareholder representatives wanted to confirm their absolute commitment to the industrial project of the company and their full confidence in the management team”) and finally He was joined by Australian management company IFM, which held its global meeting in Madrid last month and invited Reynés to attend as one of the heroes of the event.
New road map
Last July, at the same board of directors where a CEO was expected to be appointed, the update of the group’s strategic plan until 2025 was approved. (Third industrial road map of the Reynés era after 2018 and 2021, which was previously reviewed due to exceeding the set targets).
Following the company’s good financial results above expectations amid the energy crisis, The new plan revises financial targets upward and promises a shower of dividends that will delight all shareholdersboth the funds that will monetize their investments and the Criteria that will feed the social service budget of the LaCaixa Foundation (last year it received 311 million and will increase to 362 million with a planned increase next year).
The Group aims to achieve 1.8 billion net profit and 5.1 billion EBITDA in 2025 (in both cases, 300 million more than the previous estimate) and increases the dividend base from the current 1.20 euros per share to 1.40; That means 6,600 million will be distributed over five years (700 million more than previous guidance).
The company will rearrange some of its investments by adapting deadlines due to delay issues in global supply chains.total amount of 13,200 million euros (compared to the previously considered 14,000 million euros). The investment effort is intended to strengthen the strategy to continue growth in networks and renewable energy, with the goal of having half of the installed electricity generation capacity from renewable sources by 2025, up to approximately 10,000 megawatts (MW).
basic transition
Naturgy continues to champion the role of natural gas as an important transition energy towards decarbonisation. Spain’s largest gas company and the largest operator of gas plants has the role of providing security of supply to the country for both gases (a third of all Spanish gas imports pass through its hands) and electricity (due to efforts to support combined cycle power plants against the outage of renewable energy). And in this race, the company also plans to lead the renewable gas revolution in the Spanish market, with two biomethane plants already in operation and fifty other projects in different stages of development, and the subsequent transition to green hydrogen.
Naturgy supplies more than 30% of the gas reaching the Spanish market Now a major European gas hub, the company’s supply strategy has become a core element of its entire operations, focusing on reducing price fluctuations in purchase commitments through intense renegotiations throughout the energy crisis.
In this environment, Algeria has an important role. While diplomatic relations between both countries have now normalized after two years of head-on conflict over the situation in Western Sahara, Naturgy continues to negotiate with Algerian gas giant Sonatrach over the gas sales price for this year and next. A retroactive increase for the entire year 2022.
It is a complex and difficult process for two groups that have special relations, very different from other international energy groups, above the vicissitudes of crises: because Sonatrach is a shareholder of Naturgy (with 4.1% of the capital)Because they are both partners in the Medgaz gas pipeline (Algerian with 51% and Spanish with 49%) and because the Spanish group has been a buyer of Algerian gas for over 25 years and still has a supply obligation, the contract until 2030 (about 5,000 million per year cubic meters of gas) is key to Spain’s security of supply.