High power prices boost Engie earnings in first quarter

By America Hernandez

PARIS (Reuters) -French energy company Engie on Thursday said first-quarter earnings rose 30%, buoyed by high European power prices and strong trading activity, and said its full-year performance would likely come in at the top end of its forecast range.

The company said earnings before interest and tax (EBIT), excluding nuclear, were 3.8 billion euros ($4.2 billion).

"Engie has started 2023 pretty well overall, most of our activities grew over the first quarter," said Executive Vice President of Finance Pierre-François Riolacci.

Income from renewables rose more than 30% thanks to high power prices and higher hydroelectric generation in France and Portugal and new capacity coming online, while retail natural gas sales lost money due to the company holding too much supply as European market prices fell and client consumption dropped over a mild winter.

Engie's trading division was able to profit and make up for that retail loss, though the company added that European gas market volatility had begun to stabilise, which would lead to more modest trading returns going forward.

JP Morgan analyst Vincent Ayral said "Engie posted an exceptional set of Q1 results," praising the trading branch's ability to "benefit from high and volatile commodity prices" and earn about 1 billion euros more than the same period last year.

"Another positive aspect ... is a reduction of 1.4 billion euros of the net financial debt," Nadège Tellier, analyst at ING, wrote in an investment note.

French strikes earlier this year cost Engie some 60 million euros as thermal plants were unable to fully perform and infrastructure such as LNG import terminals went underused, Riolacci said.

But the company now expects it will pay less than 1 billion euros on EU-mandated inframarginal taxes this year, down from an anticipated 1.2-1.5 billion euros predicted in December.

Engie said it hoped to sign an agreement with the Belgian government by June 30 to manage two nuclear plants in a joint venture, with the last cost details left to be negotiated.

This year marks the start of Engie's financial reporting excluding nuclear, underlining its strategy of exiting the business and focusing on core assets: natural gas supply and infrastructure, with profits fuelling growth in renewables.

($1 = 0.9084 euros)

(Reporting by America Hernandez Editing by Tassilo Hummel, Mark Potter and Sharon Singleton)