Gas Natural SDG SA (GAS), Spain’s largest natural gas company, said first-half profit dropped 3.6 percent after it earned less from asset sales than a year earlier. Net income fell to 822 million euros ($1.19 billion) from 853 million euros a year earlier, the Barcelona-based company said in a statement. That compares with the 856 million-euro average estimate of analysts surveyed by Bloomberg. Excluding the effects of capital gains and losses from asset sales in 2010 and 2011, recurring first-half profit climbed 11 percent. “The divestments that were carried out, a strict investment discipline and the evolution of the company’s businesses are allowing it to progressively normalize its debt level,” Gas Natural said. Net debt fell to 16.9 billion euros at the end of June from 19.8 billion euros a year earlier. Gas Natural buys about a third of its gas from Algeria’s Sonatrach, and in June agreed to pay the state-owned energy company $1.9 billion to settle a dispute, while saying Sonatrach may become a shareholder. The deal followed an arbitration court ruling that recognized Sonatrach’s right to raise prices for gas sent to Spain since 2007 through the Maghreb Europe pipeline. The Spanish company on June 17 said it will sell a 3.85 percent stake to Sonatrach for 515 million euros, issuing 38.2 million new shares at 13.48 euros apiece for the transaction. Shares Slide Gas Natural fell as much as 1.9 percent to 14.54 euros in Madrid trading, and was at 14.60 euros as of 10:02 a.m. local time. The stock has climbed 27 percent this year, giving the company a market value of 13.9 billion euros. The Maghreb pipeline crosses Morocco and extends into Spain and Portugal. Spain also imports the fuel by ship, using six regasification terminals that turn liquefied natural gas back into gas. Gas Natural targets net income of about 1.5 billion euros in 2012 and earnings before interest, tax, depreciation and amortization of more than 5 billion euros. Ebitda rose 0.4 percent to 2.39 billion euros in the first half, the company said. Gas Natural said last year it aimed to boost dividends by at least 10 percent a year on average from 2010 to 2014. The company plans to invest at a slower pace through 2012 as it seeks to cut debt following the acquisition of the Union Fenosa SA utility in 2009, through which it gained access to gas-liquefaction and regasification plants as well as electricity-generation capacity. Average annual gross investment will fall to 1.8 billion euros from 2010 through 2012, Gas Natural said last year. Debt Plans Chief Executive Officer Rafael Villaseca said on April 14 he aims to reduce net debt to about 15.5 billion euros by the end of 2012. The pace of investment may then double to as much as 3.9 billion a year in 2013 and 2014, he said. Gas Natural had electricity-generation capacity of 17,305 megawatts in Spain and abroad at the end of December. So-called combined-cycle power plants accounted for 63 percent of capacity, hydropower 11 percent and coal-fired plants 12 percent. Spanish gas demand dropped 0.3 percent in 2010 after an 11 percent slump in 2009. To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net. To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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