February 28, 2021

Enagás and Naturgy lose billions on the stock market by cutting their networks | Companies


José María Marín, president of the CNMC.



José María Marín, president of the CNMC. Efe

The energy companies, especially the gas companies, yesterday received a strong beating on the stock market after learning about the methodology proposals of the CNMC to calculate the rates of financial compensation of its regulated assets (networks). As advanced yesterday Five days, the drafts of circulars that include these formulas were last week approved by the full council of the body for public consultation and result in a cut in the remuneration of gas networks of between 30% and 40% ( from a rate, explicit and implicit, from 10% to 7%, approximately). Those of the electric lines decrease to a lesser extent, from 6.5% to 5.4%.

The price of Enagás, manager of the gas system and transporter, collapsed by 4.5%, up to 22,510 euros per share, while that of Naturgy it did 3.5%, up to 24,020 euros. In a day in which the Ibex rose 0.07%, also the electricity companies stumbled: the shares of REE, operator of the system and transporter in high tension, fell 1.53% to 18,610 euros, while those of Endesa and Iberdrola were less affected, with decreases of 0.68% and 0.75%. Among all, they lost 1,840 million capitalization, of which, 1,082 corresponded to gas companies.

Despite the expectation generated, the CNMC has chosen not to send its circular proposals to those affected for their allegations until the weekend, a period of market inactivity. It aims to avoid a punishment that, in any case, was inflicted on them yesterday.

Since January, the agency has the power to establish the remuneration methodology of the regulated activities and to fix the tolls or access fees, which are revised every January (until now, through a ministerial order).

It is estimated that the cut for distributors, mainly, Nedgia (subsidiary of Naturgy), Redexis or Madrileña de Gas, which receive via tolls about 1,400 million annually, could amount to about 400 million. In the case of Enagás, whose revenues exceed 800 million, the pit will be proportionally high, since it is a smaller company than those distributors, also owned by integrated energy groups.

Despite criticism of a possible plot by the majority of the council; of its president, José María Marín and the director of Energy, Fernando Hernandez , appointed with the Government of the PP and that they will leave their positions in September, the certain thing is that the position of the CNMC comes from far.

The Commission already expressed in several reports of 2017 and 2018 its position on the rates of profitability of the networks

In the various reports of 2017 and 2018 on the financial situation of the regulated companies, their recommendations for remuneration of the networks to the then Ministry of Energy were made clear. Reports approved by the Regulation Room, headed by the vice president, María Fernández, and not the president of the organization.

In the electricity transport (April 2018), it warned that in the REE assets base on which the rate of return is calculated there were many amortized. The CNMC concluded that the remuneration framework established with the 2013 electric reform "had been favorable to transport for the difference between the value of the regulatory base of assets (…) and the net fixed assets at that date ", due in large part to" assets put into service before 1998 ", that is, amortized. And he asked that in the next regulatory period they stop paying "in order to comply with the principles established in the law and, in particular, to carry out an activity"low risk, at the lowest cost to the consumer. "

The same holds for the distribution of gas in a report of December 2017: "the assets included in the balance sheet of the distributors in 2000 (with a regulatory life of 20 years) will have more than recovered the value of the investment in 2020. Therefore, "the new methodology must describe to what extent have been amortized and how the investment value has increased to compensate for the expansion since 2000 ",

Regarding the reduction of remuneration for electricity distribution and gas transportation (trunk gas pipeline network), it is related not to amortized assets, but to the change of the formula to fix the rate of return: it will be done by applying the WAAC (cost of capital) and not, as up to now, the profitability of the public debt.

Gas adjustments, in 2021

The cuts to the networks will occur in the next regulatory period of five years, which, in the case of light, begins in January 2020 and in the gas, in January 2021. The explanation of why the CNMC has decided elaborate the circular polemics at the time, when the gas has more term, it is in the own law of the CNMC (RDL 1/2019), that establishes that the council must "approve before January of 2020 (..) the normative circulars with the methodologies "of regulated activities of electricity and gas.

Business sources have shown their bewilderment at the functioning of the CNMC in this its first stage as a legislator, since they have not been previously consulted, as was usual with the ministries of the day.

The cuts, however, will occur progressively, in five years. According to industry sources, the gas will go from less to more, while in light, the bulk of the cut will occur in 2021. The pit, which could exceed a total of one billion euros could translate into a decline in gas tolls and a cut of the debt of the electricity system, to which, according to the law, any tariff surplus that occurs must be allocated.

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