Engie is to engage in a strategic overhaul of its business after announcing a $9.6bn (EUR8.7bn) writedown on its oil and gas activities.
The company is targeting renewables and gas network investment in its new strategy and has also sold a significant proportion of its North American power generation assets in order to adapt to the difficult conditions affecting its business.
It is the second major asset writedown for the French gas and power utility after it booked EUR15bn for its gas power plants and gas storage facilities in 2013, leading to a EUR9.6bn loss that year.
“The collapse of oil, gas, LNG (liquefied natural gas) and electricity prices forces us to depreciate our assets significantly,” Chief Executive Gerard Mestrallet said.
He said the writedowns had no impact on Engie’s cash or debt position and were mainly related to its oil and gas exploration and production activities and, to a lesser degree, its merchant electricity generation assets.
Deputy Chief Executive Isabelle Kocher said Engie plans a three-year strategic transformation to shift towards regulated and contracted activities such as gas networks and subsidised renewables so they contribute more than 85 per cent of core earnings by 2018, up from about 50 per cent at the end of 2014.
The plan will involve EUR22bn of capital expenditure.
Engie said it had sold 13 GW of power generation assets, which will reduce its net debt by EUR5.5bn. The sales included 10 GW of capacity in the United States, of which 8.7 GW was mainly gas-fired thermal plants sold to a joint venture formed by Dynegy and Energy Capital Partners for an enterprise value of $3.3bn.
Engie also sold 1.2 GW of pumped-storage hydro assets and 0.2 GW of conventional hydro assets to the Public Sector Pension Investment Board, one of Canada’s largest pension investment funds, for an enterprise value of $1.2bn.
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