Engie to close last global coal plants by 2027 under new CEO

Engie SA will close its last coal plants in Europe, Africa and Latin America by 2027, part of the company's ongoing quest to simplify its business and put a stronger focus on renewable energy.

The French utility's new CEO, Catherine MacGregor, said Feb. 26 that Engie would get rid of its last European coal station in Portugal by 2025 and close the remainder of its capacity two years later.

Engie still owns stakes in just over 4 GW of coal-fired capacity around the world, mostly consisting of eight plants scattered across Chile, Brazil and Peru. Its largest is a 1.25-GW power station in Morocco, which the company co-owns with Nareva Holding and Japan's Mitsui Group.

The company already sold more than 2.3 GW of European coal plants to a private equity firm in 2019 and completed its exit from a Thailand-based coal and gas generator that same year. Its new target includes replacing coal in district heating networks as well, where MacGregor said units could be converted to biomass.

"We are working really hard to find alternatives," she said.

Despite its coal phaseout, Engie is one of a few major European utilities without a net-zero emissions target. The company said its greenhouse gas emissions from power generation declined by over 9% to 68 million tonnes in 2020 and it will target a reduction to 43 million tonnes by 2030.

Like other power companies, Engie saw its results during the past year hit by the effects COVID-19, which shaved €1.2 billion off its current operating income by suspending projects in its client solutions business, lowering power demand and raising bad debt provisions.

But executives said the second half of 2020 had already seen a clear recovery, thanks to lighter lockdowns in Engie's key markets. Although EBITDA and operating income were down 10.5% and 21.3% year over year, respectively, both came in slightly above what Engie indicated last summer. The utility now expects better nuclear availability and growth in its renewables and networks business to help drive a stronger performance in 2021.

The company's guidance for the current year includes a potential impact of between €80 million and €120 million from the cold weather snap in Texas during February, which impacted its renewables and supply activities. Other European utilities have so far reported potentially more significant financial impacts, while some expect not to be affected at all.

Engie's results in 2020 were also hit by a €2.9 billion impairment against its Belgian nuclear power plants, after Engie decided against working toward lifetime extensions for two of its seven units. Together with currency depreciation in Brazil and a negative effect from temperatures in France, the write-down drove the company to a net loss of €1.5 billion for the year.

MacGregor, who took over as CEO in the midst of a strategic review of Engie's sprawling client solutions business, said the company is now preparing to separate all the activities marked for disposal or spinoff into a new entity, which could be created in the second half of the year.

Engie may sell a large part of the business, but will keep asset-heavy parts of the portfolio, including heating and cooling networks, electric vehicle charging and on-site power generation. The group is targeting total disposals of €2 billion during 2021 and has already launched several sales processes to build on its recent sale of its stake in Suez SA, said Executive Vice President and CFO Judith Hartmann.

"Although we were in crisis mode in 2020, we did not lose sight of our long-term objectives," Hartmann said.