Earnings Report /
Mexico

IEnova: IENOVA, Quarterly Report 1Q21: Starts with advances on strong performance in Gas

  • Better Gas results offset lower numbers in Power. Although figures exceeded estimates, profitability pressured

  • Focus is on the takeover bid evolution (began on April 26) whose expiration and settlement dates will be May 24 and 28

  • We will closely follow the offer evolution, as well as the listing of the new entity Sempra Infrastructure Partners

Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

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Jose Itzamna Espitia Hernandez
Jose Itzamna Espitia Hernandez

Senior Equity Research Analyst, Infrastructure, Materials and Transportation

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Banorte
3 May 2021
Published byBanorte
  • Better results in Gas, more than offset lower numbers in Power. Although figures exceeded estimates, profitability came under more pressure than expected

  • Further to the company's report, attention is focused on the takeover bid evolution, which began on April 26, and whose expiration and settlement dates will be May 24 and 28, respectively

Favorable dynamics in the Gas segment, favored growth, although there were lower margins. IENOVA recorded a 16.7% y/y rise in revenues in 1Q21, mainly due to higher prices and natural gas volumes sold, as well as higher distribution tariffs, which were partially offset by lower results at the Mexicali Thermoelectric plant, due to the higher volatility in power future prices, which affected market valuation of hedging instruments. It is worth mentioning that the operations start-up in the quarter of the Don Diego and Border power generation plants, together with the acquisition of the remaining 50% of ESJ, also supported the improvement in figures. Nonetheless, higher cost of sales led to a 4.0% decline in Adjusted EBITDA to US$261 million, reducing the corresponding margin by 8.8pp to 71.4%. All segments presented decreases in profitability, mainly Power segment. Meanwhile, majority net income grew 136.3%, due to a less adverse FX effect, and the Net Debt/EBITDA ratio increased slightly to 4.1x vs. 4.0x in 4Q20.

The takeover bid is underway. IENOVA's share price is closely linked to Sempra Energy's takeover bid proposal, which has already begun and is expected to conclude by the end of May (28). Therefore, we will closely follow the evolution of the offer, as well as the share price of the new entity Sempra Infrastructure Partners. In any case, we will be attentive to any comments in the conference call to be held tomorrow.