As Europe and the rest of the world tackles the energy crisis that has led to increasing gas prices and energy security concerns, there is a massive focus on accelerating the momentum for clean energy transition. Energy majors across the globe are, thus, heavily investing in greener energy sources that are not limited to solar and wind but also battery energy storage, pumped storage, green hydrogen and carbon capture . ENGIE, a global energy giant, has also been refocusing its efforts towards expanding its green power portfolio and decarbonising its energy mix. Against this backdrop, Catherine MacGregor, CEO, ENGIE talks about the progress the company has made in increasing its renewable energy deployments and also addressing the future energy security concerns at the company’s recent Q1 2022 financial results conference call. REGlobal presents selected excerpts from her address…
Let me start with the actions that we are taking towards enhancing the security of supply given the current context. A context that is triggered by the war in Ukraine, that is having such a tragic impact on lives. ENGIE prides itself in being a responsible and compassionate company. The ongoing crisis reinforces the relevance of our strategy, a strategy that aims at a balanced, resilient and affordable energy mix. Our business model is built upon the strength of world-class industrial Global Business Units that position us strongly to steer through the current energy crisis and to create sustainable value in the long term.
We are indeed among the world leaders in renewables, and that is a platform that we are continuously developing. The strength in renewables is complemented by a large portfolio of flexible generation assets, which are absolutely key to addressing intermittency. And we own and operate significant critical networks and distributed energy infrastructure. All of these activities in combination with our unique global energy management expertise help us find solutions to the energy transition commitments of our customers. Our teams are more focused than ever in contributing to the transformation of the energy mix to the development of both renewable power and renewable gases.
As a major energy player in Europe, we are playing an active role in shaping the future of energy. First, we have diversified and increased sources of gas supply to address volume risks. We have entered into new contracts. Moreover, we are helping prepare for the future. We truly see an inflection point in unlocking the potential of renewable gases. More on this later.
Moving now to our operational and strategic progress. ENGIE has continued to perform strongly. We posted an EBIT of €3.5 billion, growing 76% year-on-year on an organic basis. Again, strong operational performance enabled us to capture high prices particularly in nuclear. Renewables performed strongly as well, and European thermal also saw high contribution from higher spread as well as ancillary services. Supply contribution increased in the market conditions that we know. The group has benefited from its strong balance sheet and liquidity, supporting temporarily higher working capital requirements. Finally, we are upgrading the guidance for 2022 in light of this very strong Q1 performance and with updated assumptions for commodity prices.
Importantly, we have made strong progress on the execution of our strategic plan, a plan which is designed to deal with solid foundation for long-term growth with the focus on simplification and value creation. We have advanced further on our disposal program. Last week we signed the SPA with Bouygues as a conclusion of the consultation period with relevant employee representative bodies. So we are on track for the completion of the EQUANS transaction in the second half, and this, of course, will represent a major step in the implementation of our strategy.
We have also completed the disposal of a further 9% of GTT and the sale of ENDEL, which is a subsidiary specialized in industrial maintenance and energy services. And we progressed with the sale of 17 energy services companies in Africa, further rationalizing Energy Solutions activities.
We have maintained the momentum on efficiency improvements across the group through the implementation of a performance plan that is focused on operational excellence, the improvement of support function, and fixing of loss-making entities. Renewable growth is on track, and Energy Solutions with strong commercial momentum, particularly in distributed energy infrastructure, winning contracts in local energy network and on site generation, such as the signing last week of a global contract with Faurecia where ENGIE will install, operate, and maintain solar panels across 14 countries.
We’re targeting 50 GW of total installed capacity by 2025 with an average of 4 GW additions per year to 2025, always with a return focused approach.
In renewables, we are continuing to work and develop a strong platform. We’re targeting 50 GW of total installed capacity by 2025 with an average of 4 GW additions per year to 2025, always with a return focused approach.
In terms of progress in the first quarter, we have secured a French hydro portfolio with the CNR concession extension granted to 2041. We have continued to strengthen our operating asset base as well as our project pipeline with the closing of the acquisition of Eolia in May, which is reinforcing our Iberian platform. And we have also acquired Photosol in the US, which will bring 17 early stage development projects.
We are really pleased with Ocean Winds that is making strides in its offshore program. Ocean Winds was only created in 2020. Since then, its portfolio has doubled, reaching 11.2 GW of offshore wind projects in operation under construction or under development. For example, in the first quarter, Ocean Winds has been awarded a lease area in the New York Bight offshore wind energy auction, for a site with a capacity of up to 1.7 GW.
In the context of rising global inflation and supply chain constraints, we are geared up to operate in what is a new normal. So, the focus is on mitigating the risk of price increase and shortage of critical supplies. Our renewables and procurement teams are working very closely, doing a fantastic job. They’re working with existing and new suppliers. They are leveraging economies of scale, even more so with the organization per Global Business Unit.
And then I’m very proud to share that ENGIE recently launched a new initiative to enhance the acceptability of renewables by society. It’s a certification that we are calling TED, which will be audited by Bureau Veritas founded on nine concrete commitments that go beyond regulatory requirements, which is demonstrating ENGIE’s strong commitment on sustainability.
From renewable power, let’s now move to renewable gases. Renewable gases have a critical role to play in the energy transition. This is recognized by the REPowerEU plan as the Commission is presenting proposals to boost the biomethane production, aiming for 380 TWh by 2030 which is doubling the current ambition. This new target corresponds to around 20% of current Russian imports.
They will support the acceleration of biomethane production in France which has the largest potential in Europe, and this is driven by its strong agricultural sector. French biomethane production capacity has been growing strongly over the last years. They have reached 6 TWh in 2021, and we believe that the current 2030 target could actually potentially rise to at least 60 TWh.
We have been engaging with public authorities to accelerate the development of biomethane in France, very encouraged by the fact that the regulatory agenda has progressed with new incentives such as production certificates, large tenders, and increased level of support on grid connection cost.
Our regulated gas networks in France are already contributing to biomethane development, for example, with around €500 million, are expected to be invested for grid connections alone from 2022 to 2024.
Our regulated gas networks in France are already contributing to biomethane development, for example, with around €500 million, are expected to be invested for grid connections alone from 2022 to 2024. And this new momentum in renewable gas will obviously play a very important role in achieving a 2045 net zero target.
Alongside biomethane, we are at the forefront of developing hydrogen. Let me give you a few examples of the project we’re working on. Reuze, a project to produce synthetic fuels from captured CO2 combined with green hydrogen. That green hydrogen would be produced by an electrolyzer installed by ENGIE. Yuri, a partnership through which we will keep producing green ammonia from green hydrogen and that project is in Australia. And RHyno, a proof of concept in South Africa, where we just inaugurated the world’s largest hydrogen powered mining truck, aiming to reduce diesel emissions in mining operations. There are so many other examples from across the group, such as the partnership that we signed with Alstom to offer the rail freight sector a solution to replace diesel with hydrogen as a fuel. ENGIE is targeting to deploy 4 GW of green hydrogen production capacity by 2030.