February 25, 2016 / 8:44 AM / 2 years ago

UPDATE 3-Engie shifts focus to regulated power as oil and gas take toll

* Three-year transformation focuses on regulated assets

* Sells 13 GW of power plants in US, Indonesia, India

* Plans to trim dividend in 2017 and 2018

* Shares up four percent after sliding at opening (Adds stock reversal, deputy CEO quote, detail on investments, oil and gas sales)

By Geert De Clercq

PARIS, Feb 25 (Reuters) - French gas and power utility Engie plans to focus on regulated activities that are not exposed to commodity prices, after writedowns on its oil and gas business cost it 8.7 billion euros ($9.6 billion).

The charges pushed Engie into a 4.6 billion net loss for 2015, reversing a 2.4 billion profit in 2014 and follow a 15 billion euro writedown on gas power plants and gas storage facilities in 2013 which led to a 9.7 billion loss.

CEO Gerard Mestrallet said on Thursday the writedowns had no impact on Engie’s cash or debt and were mainly related to its oil and gas exploration and production activities and, to a lesser degree, its merchant electricity generation assets.

Engie is not alone in taking such a hit. Brokerage Jefferies estimates that since 2010, Europe’s 12 largest integrated utilities have taken 93 billion euros worth of asset writedowns.

Mestrallet’s deputy Isabelle Kocher said Engie was responding with a three-year shift towards activities such as gas networks, renewables and energy services which it wants to contribute more than 85 percent of core earnings by 2018, from about 50 percent.

“When you are running a solar photovoltaic site, a biomass plant or a combined heat-and-power facility, you are not exposed to market prices,” she said.

The plan involves 22 billion euros of investment in renewable energy, gas networks gas storage and LNG terminals and in energy services such as heating and cooling networks, energy efficiency and decentralised renewables.

Engie’s energy services are mostly focused on industry, but it is entering the municipal and residential markets, selling people not just power and gas but also solar power systems, intelligent boilers and digital thermostats.

As part of this strategy, Engie said it had bought U.S.-based OpTerra, which sells energy services to schools, companies and cities and had 2015 turnover of $275 million.

Engie also plans one billion euros of cost savings by 2018 and 15 billion euros worth of asset sales, a third of which have already been signed, notably 13 gigawatts (GW) of thermal capacity, which will reduce debt by 5.5 billion euros.

They included 10 GW in the United States, of which 8.7 GW mainly gas-fired plants were sold to a joint venture formed by Dynegy and Energy Capital Partners and 1.4 GW of mainly pumped-storage hydro to Canada’s Public Sector Pension Investment Board.

Engie said it had also sold 3 GW of coal-fired plants in Indonesia and India and is now looking to sell its oil and gas exploration unit.

Engie’s 2015 recurring net income fell 5 percent to 2.6 billion euros last year. Core earnings fell 7.2 percent to 11.3 billion as revenue dropped 6.4 percent to 69.9 billion.

Engie said it would pay a 1.0 euro per share dividend for 2015 and 2016 and 0.70 euro for 2017 and 2018.

Although Engie shares fell 2.5 percent to a new all-time low immediately after the results, they later traded 4 percent higher.

$1 = 0.9064 euros Editing by David Clarke and Alexander Smith

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