France's Engie says big US battery move is 'decisive step'

French energy giant Engie has increased earnings guidance for a third time this year while consolidating its position as one of the companies with the fastest-growing renewables pipelines with a "decisive" move into grid-scale battery storage in the United States.

The decision to upgrade net income guidance to a range of €5.1bn ($5.4bn) to €5.7bn ($6.1bn) — up from a previously announced €4.7bn-€5.3bn was bolstered by a buoyant global energy management and sales unit.

But the company emphasised that its strategy is underpinned by continuing investments in renewables, which now account for 40% of its energy portfolio and are targeted to reach 58% by 2030.

Quarterly highlights showed a record 7.6GW of renewable assets under construction at the end of September, as the company confirmed a targeted average annual addition of 4GW between 2023 and 2025.

Engie currently has 38.6GW of installed renewables capacity and added 1.2GW of this in the first three quarters of 2023.

A 'decisive step'

Engie's most recent investments include a move into grid scale battery storage in the US, following the acquisition of Broad Reach Power, with a $1.6bn impact on new debt and will be income "accretive" in 2025.

The Houston-based company has 350MW in operation, another 880MW in construction and expected online by the end of 2024 and 1.7GW of ready-to build pipeline.

"This was a decisive step," Engie CEO Catherine MacGregor told analysts in an earnings call on Tuesday.

"We have acquired a growth platform that puts us well onto our way to achieving our 2030 target of 10GW of battery capacity... It is important to stress that acquiring an early mover in the US battery sector is very valuable, it gets us to the front of the grid connection queue, which is crucial in that market, and brings us new capacity at a very early stage."

She added: "We have decided to accelerate our development in battery storage activities.... We have great ambitions for these activities, which fit perfectly into our integrated model."

Engie also completed the $462m acquisition of Brazilian solar power company Atlas Brasil Energia, boosting its own capacity in the country by 545MW by virtue of five solar farms with output almost fully contracted.

Also in the third quarter, Engie started construction of the Assurua onshore wind farm in Brazil, with future installed capacity of 846MW.

Quality issues

Macgregor said the company is continuing to work "very closely" with Siemens Gamesa on issues identified on two Latin American onshore wind projects, one in Brazil and one in Peru.

The two turbines in question were from the 4.X and 5.X platforms that have suffered quality issues and hit the OEM's earnings,

"The 4.X and 5.X line of technology represents about 4% of our total group turbine capacity. In addition have conducted full operational reviews of all wind turbines in our portfolio. We have identified some limited issue that we are currently addressing, and they will have no impact on guidance,"she said.

On broader exposure to supply chain inflation and rising capital costs in the wind sector, MacGregor said Engie continues to enjoy a "very good execution of projects".

"We have different ranges of exposure, with some indexed to inflation, such as the French offshore where there is long-range aspect that means leaving space to change capex arrangements," she said.

"In some very specific situations where we found that the PPA was no longer representative of the market have been able to go back to customers and in many cases renegotiate the conditions of the PPAs."

Referring specifically to the decision by Ocean Winds, a joint venture with EDP Renewables, to pull out of the SouthCoast Wind in Massachussets, along with project partner Shell, she added.

"In the US offshore, we cancelled the PPA on a project that didn’t meet our conditions any more.... we obviously take the consequences," she stated, while stating that appetite in the sector for new PPAs with green electrons was "strong and encouraging."

Repowering

In the third quarter, Engie also completed a major repowering project at the Karstadt-Waterloo wind farm in Germany, where 20 wind turbines were dismantled after two decades of operation and replaced by seven new machines, each with a capacity of 6.2MW.

Through this repowering, Engie expanded the installed capacity from 26MW to 43MW which now generates four times as much energy on the same site.

In its quarterly report, Engie also highlighted the inauguration of HyPSTER, a first renewable hydrogen storage demonstrator in a salt cavern in France, and testing , for the first time in the world, of injection of 100% hydrogen into a gas turbine to produce electricity at a paper mill near Limoges.

The project is aimed at testing the production, storage and utilisation of hydrogen on an industrial scale, as well as the technical and economic replicability on other sites in Europe, paving the way for the creation of an industrial sector, Engie stated.