Gas Natural First-Quarter Net Rises 0.3% as Tax Costs Fall

Gas Natural SDG SA (GAS), Spain’s largest gas company, said first-quarter profit rose 0.3 percent after tax costs declined.

Net income climbed to 387 million euros ($576 million) from 386 million euros in same period last year, the Barcelona-based company said today in a regulatory filing. That missed a 406 million-euro mean estimate in a Bloomberg survey of 10 analysts. Tax costs fell to 144 million euros from 165 million euros.

Gas Natural is challenging a ruling by an arbitration court that recognized the right of Algerian state-controlled Sonatrach to boost the price of gas supplied to Spain since 2007 through the Maghreb Europe pipeline. The decision may mean Gas Natural has to pay as much as $1.97 billion for previous periods, according to the company.

“Gas Natural and Sonatrach are in negotiations about the price revisions foreseen in the contracts, and a beneficial result is expected for both parts to settle this controversy definitely,” Gas Natural said in a statement today.

The Spanish company on Feb. 22 said it made a provision to cover the dispute with Sonatrach. Sonatrach must accept “market reality” in a dispute over the price of gas, Gas Natural Chief Executive Officer Rafael Villaseca said on April 14. Gas Natural buys about a third of its gas from Sonatrach under long-term contracts that run through 2021 and stipulate prices should be revised every three years.

Maghreb Pipeline

The Maghreb pipeline crosses Morocco and extends into Spain and Portugal. Algeria, a member of the Organization of Petroleum Exporting Countries, has a production capacity of 1.4 million barrels a day of oil and exports about 60 billion cubic meters a year of gas. Spain also imports liquefied natural gas by ship via six regasification terminals.

Shares of Gas Natural slipped 0.2 percent to 13.57 euros at 10:48 a.m. in Madrid. Gas Natural has climbed more than 18 percent this year, giving the company a market value of 12.5 billion euros.

Gas Natural 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 rose 0.2 percent to 1.296 billion euros in the first quarter, the company said today. The company in July said it aimed to boost dividends by at least 10 percent a year on average from 2010 to 2014.

Cutting Debt

The Spanish company plans to invest at a slower pace through 2012 as it tries to cut debt following the acquisition of the Union Fenosa SA utility in 2009, through which it gained access to gas-liquefaction and regasification plants as well as electricity-generation capacity. Average annual gross investment will fall to 1.8 billion euros a year from 2010 through 2012, Gas Natural said July 27.

Net debt fell to 18.2 billion euros at the end of March from 21.1 billion euros a year earlier. Villaseca on April 14 said he aims to reduce Gas Natural’s net debt to about 15.5 billion euros by the end of 2012. The pace of investment may then double to as much as 3.9 billion a year in 2013 and 2014, he said.

Gas Natural last month agreed to sell its 800-megawatt gas- fired power plant at Arrubal in northern Spain to ContourGlobal for 313 million euros as part of a plan to meet competition rules after buying Fenosa.

Gas Natural had electricity generation capacity of 17,305 megawatts in Spain and abroad at the end of December. So-called combined cycle power plants accounted for 63 percent of capacity, hydropower 11 percent and coal-fired plants 12 percent. Spanish gas demand fell 0.3 percent in 2010 after an 11 percent drop in 2009.

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

(Source: http://www.bloomberg.com/news/2011-05-05/gas-natural-first-quarter-net-rises-0-3-as-tax-costs-fall-1-.html)