Engie jumps on strong results, dividend hike

© Reuters

By Geoffrey Smith 

Investing.com -- Engie (EPA:ENGIE) stock jumped nearly 5% to its highest in two months on Tuesday after the French energy giant announced profits ahead of expectations for the fourth quarter of 2022 and raised its dividend.

The group's recurring net income nearly doubled in 2022 to €5.2 billion (€1 = $1.0664) thanks to the spike in wholesale energy prices after Russia's invasion of Ukraine. However, it was hit retroactively by the introduction of windfall taxes in its three biggest markets of France, Belgium, and Italy, which cost it around €900 million. Those taxes will be reviewed this year and may be extended. 

Despite coming down sharply in recent months, energy prices are still well above their historical norms in Europe. As a result, Engie sees recurring net income at around €3.7B this year. It expects that to rise to a range of around €4.4B by 2025. Earnings before interest and taxes - excluding a nuclear business still clouded by regulatory uncertainty - are expected to rise to a range of around €7.1B this year, €7.7B in 2024, and €8.0B in 2025.

That upbeat outlook is also reflected in the group paying a €1.40 dividend for the year, up over 60% from 2021. Engie reiterated its policy of paying out between 65% and 75% of recurring net income to shareholders, with a dividend floor of 65c through 2025.

Engie is in the middle of a multi-year overhaul to reduce its carbon footprint. While it still sees its gas business as central to its strategy, it is investing heavily in renewables. It published new targets on Tuesday accelerating that transition, with planned capital spending set to rise to around €23.5B over the coming three years, up 50% from the previous three-year period. 

That will allow the company to install an extra 4 gigawatts of capacity a year over the next three years. The company then plans to add 6 GW a year through 2030, by which time it will have some 80 GW of renewable installed capacity. By the end of the decade, it also wants to have 10 GW of installed battery capacity, produce 10 Terawatt hours of biomethane a year, and have 4 GW of hydrogen production capacity.

Much of that investment is being financed by disposals - the French group said on Tuesday it had met its target of €11B in asset sales by the end of 2023 a year ahead of schedule.

The group's new plans also leave the door open for a nuclear revival in Belgium, which had intended to phase out its nuclear power plants until last year's energy crisis struck. Under a framework agreement last month, Engie and the Belgian government agreed to "make reasonable endeavours" to restart the Doel 4 and Tihange 3 nuclear units in November 2026.