ENAGÁS: MAIN POINTS FROM THE 2022-30 STRATEGIC PLAN (ANÁLISIS BANCO SABADELL)
ENAG has presented its 2022-30 Strategic Plan, focused on: (i) energy supply security in Spain and Europe and (ii) contribution to the decarbonisation process, where green hydrogen will play a key role over the coming years.The company has announced a new investment cycle: (i) over the 2022-26 period it includes € 1.3 Bn, which including the REPowerEU interconnections (€ 680 M) would rise to € 1.98 Bn vs. € 360 M BS(e); (ii) between 2027-30 it includes € 1.475 Bn and another € 1.3 Bn of REPowerEU interconnections, reaching a total of € 2.775 Bn.
Within the € 1.3 Bn of capex for 2022-26, we highlight the amount set aside for renewable hydrogen and biomethanol production. Enagás Renewable’s project pipeline includes: (i) 30 green hydrogen projects with € 135 M of forecast capex over the 2022-26 period and € 70 M for 2027-30; (ii) 20 biomethanol production projects with € 35 M of capex forecast between 2022-26 and € 50 M in 2027-30. However, the company has made no comments on the veto imposed by the EC regarding limits on ENAG’s management and presence on the Boards of investees that produce renewable gases.
Over this same period we also highlight the interconnection projects for REPowerEU, in stages of proposal and approval by European regulators, and not included in the company’s forecasts. If approved, the projects would not be operational until 2028 in Italy and between 2025-29 in France and Portugal. The projects would be: (i) third Pyrenean connection with France (€ 225 M in 2022-26), (ii) Spain-Italy undersea gas pipeline (€ 365 M in 2022-26), (iii) third connection with Portugal (€ 90 M in 2022-26).
As for EBITDA, ENAG has given guidance’22 of € 740 M (vs. € 786 M BS(e) and € 814 M consensus) and expects a +1% CAGR’22-26 to € 760 M in 2026e and a +4% CAGR’26-30e. This compares to our estimates of a CAGR’22-26 of 5.6%. On the Net Profit’22e level the company expects € 380-390 M including an impairment from Tallgrass of € 130-140 M (vs. € 503 M BS(e) and 497 M consensus without including the impairment, with which we would be in line) and € 330 M of Net Profit’26e (vs. € 273 M BS(e)).
The company maintains the current shareholder remuneration policy. ENAG confirms that it will not change the dividend roadmap pledged through 2026. From a DPS’21e of € 1.70/sh. (9.2% yield), the company expects +1% annual growth from 2021-23, and a floor level from 2023-26 of € 1.74/sh. (8.6% yield).
With this in mind, in our opinion the capex announced means a change in the company’s profile, with a much bigger investment effort, and even more so if the European interconnections are included in the end, as they will have long-term visibility (starting in 2026). For this reason, we still think the current dividend policy is unsustainable, especially bearing in mind the tight (and overly optimistic under some assumptions) accumulated discretionary cash flow ENAG expects to obtain over the 2022-26 period of € 200 M vs. € 1.37 Bn announced early this year as a target for the period. Thus, we maintain our SELL recommendation.
Enagas is a gas transportation company based in Spain. Co. is engaged in the technical distribution and storage of gas through pipelines as well as the provision of regasification services. Co. and subsidiaries are engaged in the ownership, administration, storage, pipeline transportation, distribution flow, and sale of natural gas. As a transport company, Co. also provides gas and manages the gas infrastructures.
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