Naturgy faces this Tuesday one of its most transcendental boards of directors. Its 12 members will discuss the arrival of Ignacio Gutiérrez-Orrantia as CEO after the discontent of the funds that control the gas company with the management of Francisco Reynés. The current top manager of Citigroup’s investment banking for Europe, the Middle East and Africa will have the mission of revaluing the company’s assets with or without ‘Geminis’ to facilitate a possible sale of part of the capital.
Business sources say that Global Infrastructure Partners (GIP) and CVC Capital Partners, which control 40% of the capital, have been the main drivers of accelerating the change at the top of the company and thus restoring powers to Reynés. The same sources affirm that the name of Gutiérrez-Orrantia would have come from the mouth of Isidro Fainé himself, president of Criteria Caixa, the main shareholder with 26.7% of the capital.
Reynés has been Chairman of Naturgy since February 2018 and is the only director with executive status. Fainé (who did not have executive functions) took over as his trusted man when Reynés was vice president and CEO of Abertis. His appointment also meant the departure of the then CEO of Gas Natural Fenosa, Rafael Villaseca.
Semi-annual results pending
Naturgy managed to close 2022 with the best result in its history, earning 1,649 million euros due to high energy prices, but its evolution this year is still unknown, because it was the first company on the Ibex 35 to benefit from the reform of the law that allows not presenting quarterly results. With declining margins and rising shareholder expectations, the search for a boost for the company’s management has gained momentum after the spin-off plan that was announced in February 2022 stalled.
Reynés, who will also be judged by the semi-annual results that the company intends to present before the end of July, was re-elected to the position just a few months ago for another four years, but the renegotiation of the supply contract with Algeria and the impossibility of relaunching Geminis. The manager unknowingly chose the worst moment to undertake the most important transformation in the company’s history. Twenty-something days after announcing the plan to divide Naturgy into two listed companies, Russia invaded Ukraine and the energy outlook was blown up.
The idea is that one company encompasses the liberalized business and another is in charge of the regulated activities. Both would continue trading after a capital division of one share for two. In this way, the shareholders will have titles in the two companies in equal parts, with half of the real value. The funds understood the operation as a possible way to get rid of free assets, but the geopolitical context stopped any type of movement. After many rumors about possible shareholding movements, in November last year the funds wanted to calm the waters by ensuring their “investor commitment”.
Now, Naturgy is considering giving the nucleus of power to the new CEO, according to Cinco Días in advance, and a new horizon is opening up to be defined. Gutiérrez-Orrantia himself was the one who led the report by the Naturgy board of directors on the IFM takeover bid and the group’s latest strategic plan. The Appointments, Remuneration and Corporate Governance committee of the Naturgy board of directors has met up to five times in the last two months to discuss the return of the figure of the CEO.
IFM strengthens itself in Naturgy
For its part, while it has flown over the exit option of CVC and GIP, IFM has been reinforcing itself after the takeover bid. The main offer was promoted to 22.69% and with this capital two seats would have been achieved, but it was finally consumed by 10.83%. However, it gradually increased its share with minority purchases (until it reached 14% in real terms). After months of rumors and an internal dispute between IFM and Criteria Caixa, Jaime Siles became part of the board of directors. In order for Siles to enter without increasing the number of directors, the independents Francisco Beli and Ramón Adell resigned. The latter became the new proprietary director by co-optation of Criteria Caixa.
In this way, Criteria Caixa strengthened its position, going from two to three directors, while CVC and GIP maintained two seats. In addition, Reynés and the rest of the management leadership will be able to win before the arrival of IFM and they do not have to report to the council for asset sales operations that have a value of less than 100 million euros, the sooner the limit was 50 million . It can also sign gas supply contracts valued at up to 300 million euros and the red line was raised to 800 million euros so that these contracts must have the majority support of the council.
Remember the Divido
Under the strategic plan that will be presented in 2021, Naturgy contemplates investments worth 14,000 million, of which 8,700 will be allocated to growth in the area of renewables in order to triple its installed capacity in clean energy. In return for this effort, there is a cut in the distribution of profits among shareholders, by including the delivery of 5,900 million in dividends. The figure represents a ‘snip’ to the shareholder remuneration contemplated in the previous plan (2018-2022), since the ‘pay out’ falls to 85% of the profit compared to 120% that was incorporated in the previous roadmap.
Naturgy’s small shareholders have been receiving recommendations from different ‘proxy advisors’ to vote against the long-term incentive for Reynés and other executives. The manager raised 5% of his salary in 2022 by pocketing a total of 5.85 million euros, while the downsizing around the world has intensified since he became president.
