Belgium’s Distrigas lifts profits on back international growth
Belgian gas major Distrigas posted 1H 2006 net profits of EUR 184.2 million on Thursday, up 60% year-on-year. High gas prices boosted the results, but the rise was accentuated by the application of a new accounting standard.
A slight drop in gas sales in Belgium was offset by growth in other markets, as Distrigas consolidated its position in France and made inroads into the Dutch and German markets. In total, sales outside Belgium and arbitrage increased by 25% and accounted for around a fifth of total sales in the first half of 2006. Revenues from LNG arbitrage trade took a sharp upturn during Winter ’06, while LNG sales to other European energy players were down from the record levels of 2005. Total sales rose by around 2.5%.
The fall in domestic sales was mostly due to sluggish demand from the industrial sector on the back of high gas prices. The chemical industry was especially hard hit, with demand down 10%, according to Distrigas. The group also saw its market share in the industrial sector shrink during the first half of the year. Sales to power producers fell almost 14% following unexpected disruptions to LNG deliveries intended specifically for the sector.
“We received less gas than planned because of some technical constraints of supplier,” a Distrigas spokesman said, although he would not elaborate on the type of constraints.
The shortfall in LNG deliveries was partly offset by Egyptian and Qatari cargoes bought on the spot market. “We bought LNG on the spot market both to compensate for the gas we didn’t receive and to take advantage of arbitrage opportunities in the market,” the spokesman said. EBIT rose to EUR 186 million, up around EUR 38.5 million, “enabling the company to take advantage of favourable market conditions to seize… arbitrage opportunities,” the company said in a statement.
Distrigas’ long-term contract for 4.5 billion cubic metres (Gm3) per year with Algeria’s Sonatrach is also set to expire at the end of September this year.
The drop in sales to Belgian industry was softened by growth in sales to resellers and distributors, up 7.1% year-on-year as the harsh winter temperatures fuelled end-user demand.
EU investigation deadline looms
Distrigas is currently being investigated by the European Commission’s competition authorities over its long-term contracts (see ESGM 12.093). The Commission is arguing that Distrigas is abusing its dominant position to foreclose the market, and has set a deadline of 1st September for Distrigas to respond to its statement of objections. Neither Distrigas nor the Commission wanted to comment on the matter before this deadline had expired. IS
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