French gas giant GDF Suez reported a huge net loss for last year, the latest gas provider to reveal the depth of upheaval from the boom of shale energy in North America.
The group, which also distributes electricity, reported a net loss of 9.7 billion euros ($13.24 billion) for 2013 from sales which slipped by 0.8 percent to 81.3 billion euros.
The results were hit hard by writedowns totalling 14.9 billion euros reflecting weak demand and, more significantly, increased competition from coal.
Several energy companies in Europe have had to revise the assumptions behind their strategies, pricing and investment because of changes in the structure of energy markets caused by the shale energy boom in North America.
One effect has been a fall of prices for energy resources there, and notably for coal which is now reaching European power stations on highly competitive terms.
GDF Suez said it had decided to make the writedowns because “the group believes that the change in environment in Europe is now serious and long-lasting.”
But regarding the outlook, the group said it intended to be “the benchmark energy player in fast growing markets”, notably by developing liquefied natural gas activities and being strong along the gas value chain, including infrastructures.
Chief executive Gerard Mestrallet told a telephone press conference that the group considered the changes in the European energy market to be “lasting and profound” and that “we have decided to draw all the radical accounting consequences regarding the value of the assets affected.”
However, the writedowns had no effect on the company’s cash position and financial strength, he said.
In 2012, GDF Suez had already taken writedowns of 2.0 billion euros.
The group has closed, mothballed or converted 14 gigawatts of production capacity in Europe since 2009 and has said it will review the future of another 5.0-7.0 gigawatts, mainly in the form of gas-powered power stations.
These facilities are suffering both from the injection into the power grid of electricity generated by renewable sources, and rising use of cheap coal for coal-fired plants.
– Shares rise despite writedown –
Net recurrent profit at GDF Suez, excluding exceptional items, was 3.4 billion euros, a fall of 10.0 percent from the 2012 level.
The group said it expected this to be in a range of 3.3-3.7 billion euros this year.
This figure was based on an estimate that gross operating profit would be 12.3-13.3 billion euros, from 13.4 billion euros in 2013.
Despite the huge charges taken for 2013, investors responded well to the statement and the price of shares in the group was showing a gain of 2.79 percent to 18.04 euros in morning trading. The overall French stock market was up 0.20 percent.
The board recommended holding the divident payout to shareholders at 1.5 euros for 2013.
Internal sales rose by 3.0 percent, helped by a hard winter last year which boosted demand for energy, and by the development of international activities.
The group struggled overall in difficult market conditions in its mature traditional markets in western Europe, and particularly in France and Belgium.
It said it was focusing on developing in emerging economies where demand for energy was strong.
Mestrallet said: “We achieved an impressive harvest of contracts on international markets, from Uruguay to Mongolia, from the United States to South Africa.”
However, “we are not abandoning Europe,” he said. “We want to accelerate and anticipate the changeover of the old energy world towards the new world of energy transition.”
Net debt fell to sightly less than 30 billion euros, a year ahead of target, and this caused the group to cancel a programme to sell assets to raise 11.0 billion euros to reduce debt.