Gas Natural Shares Fall as Sonatrach Provision Hurts Profit

Gas Natural SDG SA, Spain’s largest gas supplier, dropped in Madrid after saying it made an additional provision to cover a dispute with Algeria’s Sonatrach. Full-year profit fell short of analyst estimates.

The stock declined as much as 4.3 percent, the most since Sept. 10, and traded at 12.13 euros as of 10:30 a.m. local time. Gas Natural shares have added 5.6 percent so far this year, giving the company a market value of 11.2 billion euros ($15.2 billion).

Full-year 2010 net income climbed 0.5 percent to 1.2 billion euros, the Barcelona-based company said today in a regulatory filing. That compares with the 1.34 billion-euro mean estimate in a Bloomberg survey of analysts. The company said the additional provision “conditioned earnings,” without specifying the value of the provision or the effect on profit.

Gas Natural is challenging a ruling by an arbitration court that recognized the right of Algerian state-controlled company Sonatrach to boost the price of natural gas supplied to Spain since 2007 through the Maghreb Europe pipeline. Gas Natural has said the decision has a maximum retroactive impact of $1.97 billion and could reduce 2010 profit by as much as 450 million euros.

Gas Natural today said it’s in talks with Sonatrach about the price revisions and said it expects a result that is “beneficial to both sides.”

The company’s board is proposing issuing as much as 413 million euros in new stock to offer investors the possibility of receiving shares as part of the dividend on 2010 earnings.

Gas Natural in July had said it aimed to boost dividends at least 10 percent a year from 2010 to 2014. It targets net income of about 1.5 billion euros in 2012 and earnings before interest, tax, depreciation and amortization of more than 5 billion euros. Ebitda increased 14 percent to 4.48 billion euros in 2010, the company said today.

Investment Slowed

The Spanish natural gas company completed buying rival utility Union Fenosa SA in 2009, gaining access to gas- liquefaction and regasification plants as well as electricity- generation capacity. It now plans to invest at a slower pace through 2012 as it tries to cut debt following the acquisition of that utility.

Average annual gross investment will fall to 1.8 billion euros a year from 2010 through 2012 from about 2.1 billion euros last year as the company spends on its distribution and generation units, Gas Natural said on July 27. The company aims to reduce net debt to between 15 billion euros and 16 billion euros in 2012.

Net debt declined to 19.1 billion euros at the end of December from 20.9 billion euros a year earlier.

The company has said it may add 1,200 megawatts of additional renewable-energy capacity in Spain by 2014 and forecasts its total installed capacity will range between 15,600 megawatts and 17,700 megawatts in 2014.

(Source: http://www.bloomberg.com/news/2011-02-22/gas-natural-shares-fall-as-sonatrach-provision-hurts-profit.html)