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Gas Natural Shares Fall After Ruling on Sonatrach Gas Contract Price Case
Gas Natural SDG SA fell the most in six weeks in Madrid trading after an arbitration panel said it must pay Algeria’s Sonatrach more for gas, a decision that could raise the energy supplier’s costs more than 300 million euros ($386 million) a year.
Spain’s biggest gas distributor dropped 34 cents, or 2.7 percent, to 12.10 euros a share, the steepest drop since July 1. The stock has lost 20 percent so far this year.
The tribunal recognized Sonatrach’s right to boost the price of gas supplied to Spain through the Maghreb Europe pipeline since 2007, Gas Natural said yesterday in a regulatory filing. The Spanish company will have to pay about 1.5 billion euros ($1.9 billion) for the gas provided in 2007, 2008 and 2009, Expansion newspaper reported, citing unidentified people in the financial industry.
“It’s not possible for Gas Natural to simply change supplier because its contract with Sonatrach is long term,” said Javier Garrido, a Madrid-based analyst at JPMorgan Chase & Co. “These contracts are usually 20 to 25 years long,”
Barcelona-based Gas Natural could use amounts set aside in past years and raise rates for some clients to pay for the amounts defined in the ruling, it said in the filing, without providing details on the amounts.
“Were the ruling to apply to future supplies, the additional cost for Gas Natural could be 300 million euros per year,” Alberto Gandolfi, a London-based analyst at UBS AG wrote in a note to investors, citing figures from press reports. “This would imply a reduction in 2011 earnings per share in excess of 15 percent we estimate.”
The extra costs may crimp growth in Gas Natural’s dividend payments, Gandolfi said.
Gas Natural disagrees with the ruling, it said. The contracts represent a quarter of Spain’s gas demand, the company said. Joan Cabre, a spokesman for Gas Natural, declined to provide further comment.
To contact the reporter on this story: Paul Tobin in Madrid at ptobin@bloomberg.net; Sharon Smyth in Madrid at ssmyth2@bloomberg.net.
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