Santander Corporate & Investment | Enagás (Baa2u e, BBB e, BBB e) has announced the sale of its 30.2% stake in Tallgrass Energy to Blackstone for $1.1 billion (equivalent to €1.018 billion). The company noted that the sale is part of the asset rotation programme announced in the 2022-30 Strategic Plan. Enagás will record an accounting loss of €360 million, but also noted that the divestment will have a very positive effect on cash flow and will strengthen its balance sheet ahead of the execution of its hydrogen investment plan.
Assessment: Enagas’ share price jumped 6.3% as the stock market celebrated the company’s divestment from Tallgrass Energy. On the credit side, we have a more optimistic view.
Enagás made a €133 million impairment provision in 2022, which is now followed by an accounting loss of €360 million, indicating value and cash destruction that will not be recovered. Moreover, dividends from Tallgrass Energy were conspicuous by their absence. The €1 billion in cash from the transaction will undoubtedly help Enagás’ credit profile for the investment plan to prepare the company for hydrogen deployment. However, we have doubts, at least on the timing and potentially on the profitability of hydrogen, except in very specific industrial sectors, and if there are high CO2 prices and government subsidies. Pending clarification on the timing and value of the hydrogen investment, we maintain our Neutral recommendation for Enagás.
