Engie SA

PAR:ENGI

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the conference call on ENGIE First Quarter Financial Information organized by ENGIE, along with Ms. Isabelle Kocher, Chief Executive Officer of ENGIE; and Ms. Judith Hartmann, Executive Vice President and Chief Financial Officer; and Mr. Paulo Almirante, Executive Vice President and Chief Operating Officer. For your information, this conference is being recorded. Thank you for holding. Ms. Kocher, I now hand over to you.

[Isabelle Kocher, CEO & Director]

Good morning, and thank you for being with us today. I am very pleased to welcome you together with Judith Hartmann, our CFO; and Paulo Almirante, our COO, to present our results for the first quarter of '19. I will start with a few key observations and then an overview of the numbers and Judith Hartmann will then provide an analysis of our results and full year outlook. And we will then, the 3 of us, be happy to take your questions.Our first quarter results, which you would have seen earlier this morning, were modestly down overall. These results are in line with management's '19 phasing expectations, except for climate effect, which we cannot, by definition, anticipate.This quarter was primarily impacted by above-average winter temperature in France and excluding the negative temperature effect on our Networks and Supply businesses, our group results were approximately level with prior year, which is in line, again, with our '19 phasing expectations, based on several other factors.As expected, we had lower nuclear power production with lower availability of our Belgium nuclear units. And Client Solutions results were atypical, driven by timing effect and selected recent renewables, driving a slower start than last year. Conversely, our thermal and renewable activities have demonstrated strong organic momentum with promising PPA growth. For the rest of '19, we expect our prior year comps to ease, notably in Nuclear and Client Solutions activities. And given the patterns of these comps, our underlying momentum and our ongoing operational action plans, we are confirming our previous full year '19 guidance with growth expected to be weighted towards the second half.To look now at our key Q1 numbers, and it will be detailed much more by Judith, of course. EBITDA and COI respectively were EUR 3.1 billion and EUR 2 billion, both down minus 4% on an organic basis. Net debt stands at roughly EUR 23 billion, stable versus the end of '18, and CFFO decreased, notably due to timing effect from commodity-related margin goals and financial derivatives. Operating cash flow remained stable.Beyond the figures, during this quarter, we continued to execute our group strategy in accordance with our intents described at our recent Capital Markets Day. We finalized, you've seen, the sale of our coal generation in Thailand, and we announced the disposal of most of our European coal plants. Coal now only accounts for 4% of ENGIE's total power generation capacities. Recently, we also announced the major acquisition of TAG in Brazil. This transaction is fully aligned with ENGIE's strategy, supporting Brazil which is one of our largest countries of operation, in the decarbonization of its energy mix. TAG owns and operates 47% of natural gas transmission in Brazil, with 4,500 kilometers of gas pipelines and an attractive growing portfolio of long-term capacity contracts. Moreover, ENGIE will manage the assets, with the operations and maintenance being progressively in-sourced over the 3 years to come. Along with our Canadian partner Caisse de dépôt et placement du Québec and also our Brazilian subsidiary, we acquired a 90% stake in TAG while Petrobras will retain a residual 10% stake. And given our financing structure of this acquisition and net equity ownership, we expect a net debt impact of EUR 1.6 billion. Post closing, we will hold a separate call dedicated to this milestone with insights into TAG's operations and also its financial impacts on ENGIE's medium-term guidance, which does not include for now the contribution from TAG. This move is really great. And I now hand it over to Judith for a detailed review of our Q1 financial performance and '19 outlook.

[Judith Hartmann, CFO & Executive VP]

Thank you, Isabelle, and good morning, everyone. Q1 was indeed impacted by headwinds, which we expect to subside or reverse during the remainder of 2019. These were clearly led by the significant warm winter temperature effect in France. Before diving into each business line, I want to highlight a few drivers illustrating our expectation for earnings growth weighted to the second half in 2019. First on Nuclear. As you all know, we were impacted mainly in the second half of last year by unplanned outages in Belgium. As you can see on the slide, our unfavorable Q1 trend is expected to completely reverse based on current REMIT forecast availabilities. Second, regarding French temperatures, we note the potential prospect of easing prior year comps. If temperatures are closer to normal, as last year's H2 was particularly warm. And third, on French hydro production, you will remember that 2018's Q1 was one of the best quarters in history. So it creates a tough comparison for this year's first quarter. Assuming average historical production, this driver should not act as a drag over the next 3 quarters. Let's now look at our 1Q performance by business line. First Client Solutions. Results were atypical this quarter. This activity faced challenging comps, as Q1 2018 was exceptionally strong, up double digits at the time. Contract phasing, selected recent renewals and a slowdown in engineering activity all contributed to a weaker start for the year. On engineering, the situation is not new and there is an ongoing action plan. At the same time, our businesses are incurring increased development costs across Latin America, Europe and United States to lay foundations for new business constraining our short-term margins.Accordingly, our revenue and our backlog both continued to rise during the quarter. In the context of seasonally small Q1, these factors have a higher proportional impact on the smaller base of profits. Given our ongoing assessment of the Client Solutions business, we remain confident in our prospects for the rest of the year, and we expect mid- to high-single-digit COI growth for the full year 2019.We do believe that the strong underlying performance will be weighted towards the second half, as prior year comparables will ease and contract phasings are expected to subside by Q3. Increasing order backlog and contributions from tuck-in acquisitions will deliver greater impact. We continue to address some market dynamics through performance plans in order to continue to improve our competitiveness. And like I said, revenues increased 8% in Q1, and we expect this momentum to remain favorable. We are also reiterating our midterm guidance provided at the CMD, which includes a significant contribution from the tuck-in acquisitions planned over 2018 to 2021. This should account for approximately 50% of the Client Solutions' CapEx. Let's now move to Networks, where COI was down 5% in the first quarter. This winter's warm temperatures weighted on performance, with lower volumes in gas distribution in France. And excluding the abnormal temperature effect in France, the business line COI would have actually risen by 2%. We also face a tough comparable in relation to positive one-offs in 2018 in Latin America, notably in Mexico with a liquidated damage settlement last year that you may remember. Those headwinds were partly offset by the continuing beneficial effect of French storage regulation since April 2018.With respect to our Networks outlook for mid-single-digit COI decline in 2018 that you can see on the next page, last year's second half saw particularly warm temperatures, providing an easing comparable for the remainder of 2019. French transmission and distribution volume headwinds will be partly offset by positive tariff variance. Please note that the Storengy regulation was introduced in April 2018. Therefore, for the remainder of the year, profit outlook for Storengy will be broadly stable compared to last year. Lastly, we expect a positive swing in international activities.In Renewables, we see sustained growth. COI was up 7% in the first quarter on a gross basis. Organically, Renewables COI grew 13% despite significantly lower hydro volumes in France, demonstrating our strong momentum in this business. Our operational progress continued with the commissioning of 900-megawatts of additional solar and wind capacity. Key projects were completed in our targeted geographies, including Umburanas in Brazil, Live Oak in the United States, and our first concentrated solar panel project -- Kathu -- in South Africa.Offshore wind progress was demonstrated in the first quarter with 2 construction starts in the U.K. and in Belgium. And we have created an exciting joint venture with Tokyo Gas to create a financing platform for our renewable activities in Mexico, illustrating our ability to implement our DBpSO model. Looking at the rest of 2019, we anticipate acceleration in our Renewables profit delivery to a growth rate in the low teens for the full year, compared, again, to 7% of the first quarter. This performance will be enhanced by improving hydrology and increasing solar contribution in Brazil and a more favorable comparison for French hydro in the second half. DBpSO project sell downs and associated booking for -- of P&L profits across a range of targeted geographies are intended to take place mainly in the second half of 2019 as was the case in 2018. Let's move to Thermal and Nuclear. Our Thermal and Nuclear businesses delivered contrasting performances in the first quarter. Thermal COI was up 6%, mainly driven by a growth momentum in Latin America PPA contracts as well as positive spot market conditions in Chile and Peru. In addition, we benefited from dynamic management of the optionality of our European gas generation portfolio and lower D&A due to the IFRS 5 treatment for Glow. Conversely, as expected, Nuclear COI was down 45% in Q1, given the unavailability of 3 of our Belgian reactors earlier this year. Today, 6 out of 7 reactors are up and running.On the full year outlook, we expect a gross thermal COI reduction of approximately 20% due to our completed Glow disposal, partly offset by continuing PPA growth in Latin America and higher thermal spreads. On Nuclear, negative trends will reverse very markedly in the second half, given our improving availability comparisons and higher hedge prices, and we expect 2018's losses at COI level to reduce by approximately 2/3 in 2019. We reiterate our midterm guidance, excluding the Glow contribution, which we mentioned to be a negative 6% to negative 3%. If we now move to Supply, the significant COI reduction of approximately 20% in Q1 was mainly driven by the negative temperature effect in France and Australia, to some extent, as well as continuing margin pressure in French retail.In Other activities, our energy management business performed well internationally and in its renegotiation of long-term gas contracts. In addition, our latest group efficiency program, Lean '21, has begun to deliver cost savings at the corporate level.For the total year in Supply, we anticipate a slightly lower decline for the full year. COI to be down in the upper teens on the basis of assumptions of normal temperatures for the rest of the year versus a warm second half of 2018. In the Other segment, we expect slower low-teen COI growth in 2019, as energy management normalize while the sale of U.S. LNG activities should have a negative impact. Turning now to cash flow. CFFO was down in 1Q by EUR 1.6 billion year-on-year, mainly due to timing effects from commodity-related margin calls and financial derivatives. Our operating cash flow remained, in fact, broadly stable. We expect group CFFO to substantially increased by year-end, notably on the back of a significant reversal of the margin calls and financial derivatives. With that, I will hand back to Isabelle to conclude.

[Isabelle Kocher, CEO & Director]

Thank you, Judith. So to very briefly summarize the key points, our Q1 '19 results suffered from particularly warm winter temperatures and were also subject to some challenging comparables. But they were otherwise in line with our overall group's expectations and phasing outlook for '19. We are pleased with our organic performance delivery in Renewables and in Thermal, while trends in Nuclear and Client Solutions will reverse by year-end. Therefore, we reconfirm today our full year guidance for '19. And we are now happy to take your questions.

[Operator]

[Operator Instructions] We will take our first question from Aymeric Parodi of UBS.

[Aymeric Parodi, Equity Research Analyst]

My question is on the gas network in Europe. At the Capital Market Day, you said you expected consolidation. If I am right, the PACTE law has been adopted now in France. Is there any update you can give us on the consolidation of gas in Europe?

[Isabelle Kocher, CEO & Director]

Well, we effectively spoke about that during our Capital Market Day, and we really very clearly stated that in our view, it would make sense to provoke a consolidation between the players in Europe as far as transmission networks -- transportation networks are concerned. And this is to [ ensure that will be doing ] because the PACTE law has been voted, not yet promulgated, but that is true, that it opens some options and I confirm that we are absolutely open to pursue in that direction. And we will be updated if any option effectively becomes available.

[Operator]

We will take our next question from Vincent Ayral of JPMorgan.

[Vincent Jean Michel Ayral, Analyst]

And so I will skip the question on the TSO and the PACTE law, it has been done. And now the question I would have is, you also talked about potential partnership with a large firm on your DBpSO pay type of model. And I think this would have been in coming months, if I remember properly. Are the discussions still going on? Are we -- should we still expect something like that? But that would be one question. The other question would be related to your Client Solutions. When you provided your guidance, were you aware of these timing effects? And was this already taken into account?

[Judith Hartmann, CFO & Executive VP]

Vincent, I think your first question was around the DBpSO. And you mentioned the activities that we mentioned around this at the Capital Markets Day. So really there's different approaches that we're taking here. One is to have regional platforms that we have started to implement. As you know, we have one in place or have had one in France for quite some time. The one I mentioned earlier is related to Mexico renewables, where we have signed a joint venture with Tokyo Gas. And really what it means is, our new projects are going to be able to be dropped into this and as opposed to having a project-by-project basically sell down, we now have a platform where we can drop in projects. The same -- we're working on the same in India, in, I would say, in all of our big Renewable countries. Brazil is another one I would mention. So all of that is ongoing, and I feel very confident on being able to execute this as planned through the rest of the year. You had a question on the Client Solutions guidance and the 1Q impact of the result. What I would say about that is we feel confident on this turnaround, if I can say timing-wise for the rest of the year. Q1 is quite a small quarter for our Client Solutions. It's about, like you saw, it's about EUR 200 million. So it is really a relatively small quarter. And there's a few things that happened that we already know that are going to reverse. There were a couple of very specific contracts in the U.K. and in Italy that had an impact that were renegotiated, and we already know that those 2 countries have signed significant contracts to offset that for the rest of the year. There is an impact on tuck-in acquisitions that are going to be much more positive at the end of the year. In fact, when I mentioned that in 1Q, we have some impact from investments, those are also some -- you might call it investments, you might call it startup losses -- but investments that we're doing. Examples are Chile, example are e-mobility that are also going to start have more positive contributions for the rest of the year. And then the third aspect that I mentioned, is really the one that is a structural pressure, if I may call it that way. It's the engineering activity, where in line with what we have said in the past, with the decentralization of the energy world, you have less very large projects. And that means -- not just for us, but in general for the energy sector, which means we have very -- less very large engineering topics. And that is a known -- spot that we know that we are addressing with action items. So we feel confident on the base estimate that I've mentioned on the page and there's very clear action plans in place to get us there, to make sure that we're executing on these expectations.

[Vincent Jean Michel Ayral, Analyst]

And I would ask a follow-up question on that. I mean [indiscernible] came really last minute before the conference call. So -- sorry, if I miss something, I have been trying to do both at the same time. Regarding the CFFO, I wanted to understand a bit what was the order of magnitude of the margin calls and financial derivatives and how we should look at it over the coming quarters? And I think you talked about a reversal by year-end.

[Judith Hartmann, CFO & Executive VP]

Yes, indeed. So a very big impact, very significant impact on our first quarter results on margin calls, and that's really the bulk of the explanation. And we do believe that those are going to taper out over the rest of the years. As you know, gas prices are down, and we are in a net buyer position. So when you have a movement in the prices like we had just recently, then you have basically a temporary dissymmetry if I may call it that way, between the hedging tool and the underlying operational flow, meaning that you have the impact in Q1 on the hedging tool, and then it will resolve itself over the rest of the year. That's really the bulk, that EUR 1.3 billion of impact. We had much smaller -- to a much, much smaller extent impacts on our operating cash flow. And I would mention 2 things here. Of course, there is an impact on inventory with the warmer temperatures, meaning you have higher inventory because you sell less gas. But again, that obviously is going to be worked on for the rest of the year. So not concerned there. And then there is an impact on accounts payables where lower prices on gas had an impact. So quite frankly, we feel confident for the rest of the year on the cash flow, it should be in line with what we said -- with what we had last year.

[Operator]

[Operator Instructions] We will take our next question from Carolina Dores of Morgan Stanley.

[Carolina Botacini das Dores, Equity Analyst]

I have 3. The first one, if you can give us at least a ballpark of how much TAG contributed to your 2019 earnings? Second question is, you had unfavorable weather, some headwinds in services, but you also have or you expect to do some tuck-in acquisitions and you have TAG. So are you in a position to guide us of where do you think you are on the lower, middle, upper range of your guidance for 2019? And my final question is, Judith, you mentioned that there's a positive effect of gas contract renegotiations in the first quarter results. Is this a release of a provision? Or this is just like better margins that therefore are going to be -- are going to continue through the coming quarters?

[Judith Hartmann, CFO & Executive VP]

Okay. So Carolina, 3 questions from your side. On the -- I'll take the guidance one first. So we are -- it's only one quarter in, it's only one data point obviously. We feel confident to confirm the full year guidance and quite frankly, wouldn't want to -- would not want to specify it more than that. TAG contribution we should -- we are hoping to close this at the end of the first half. And like Isabelle said earlier, we will do an investor call on this transaction, which we will see as very positive for our growth. If the -- assuming that it's going through at mid-year, quite frankly the impact would be -- would already be there and it would be below EUR 50 million. And then your question was on the gas negotiations that I mentioned. Those are actual negotiations and it is actual better margins that we are seeing in the first quarter. So very positive.

[Operator]

We will take our next question from Emmanuel Turpin of Societe Generale.

[Emmanuel Philippe Turpin, Equity Analyst]

I'd like to focus my questions on the Client Solutions business. The performance was down in Q1, you said minus EUR 42 million in COI. And I would love a bit more color on the explanation you provided in answer to a previous question. I didn't quite understand what you meant by renewal of contracts in U.K. and Italy. Could you explain to us what the headwind was and what the solution is going to be here?And stepping back, you are still guiding for a mid- to high single-digit growth in the full year. And so we are starting the year at EUR 40 million down. And in the full year, if we look at the bottom of that mid- to high single-digit, it would add around EUR 50 million. So all in all, in the remaining 9 months of the year, you need to make a growth of between EUR 90 million and EUR 100 million, let's say. Could you explain to us maybe in broad buckets where this growth is going to come from? I can think of a number of buckets, organic growth outside of cost-cutting. Then there's probably cost-cutting contribution on scope, i.e. tuck-in. Are you able to give us some -- to basically tell us with some confidence about meeting that target and through these, I would say, buckets of growth?

[Judith Hartmann, CFO & Executive VP]

Emmanuel, on your first question, Client Solutions, what I mentioned on Q1, there was 2 very specific contracts that were negotiated. So again, you have to -- first of all you have to take it into -- put it into perspective that the Q1 numbers on Client Solutions are actually relatively small because of the seasonality of this activity, as they always are quite frankly. And so any move that I'm going to describe has proportionately a bigger impact on the variances. So there's 2 specific contracts, one in the U.K. and one in Italy that I've mentioned, that were -- that had a combined impact of close to EUR 15 million of a mix of negotiation, lower prices, and also with a couple of million of upside last year in that same contract. The reason why I said I was not concerned about that because that's quite frankly normal course of business. And we have in both of those countries signed other contracts that are going to create the growth that we were expecting for the rest of the year. And so that leads into your second question, which was where do we take the confidence from to get to mid- to high single-digit growth, which you calculated to be about EUR 100 million that we have to catch up for the rest of the year -- and that's roughly the number that I am looking at -- which are really related to exactly the topics that you brought up. Obviously organic growth, I mentioned some of the contracts already signed. Of course, the cost is going to continue to -- the cost items are being worked on. North American, France are examples that I can think of. And then, yes, acquisitions that had a scope, the acquisitions that have already been done, will have a more significant impact in the second half. I will mention one, which is the OTTO acquisition, which was done at the end of the last year in Germany, not yet in the first quarter numbers. But there is a number of smaller acquisitions that will contribute positively. And so it is going to be a good mix of all the 3 levers that you've mentioned that are going to get us there. And needless to say, like I mentioned earlier, there are very precise action plans in place to make sure that we're actually coming through on this. This is very important for us. And so we have really lined up our action plans to make sure that this is coming through. A lot of it already in the bag, if I may call it that way, with signed contracts and some of the acquisitions, but the cost actions -- we have our -- the full force of the organization to make sure that we're coming through on this.

[Emmanuel Philippe Turpin, Equity Analyst]

Then, if I may...

[Isabelle Kocher, CEO & Director]

Also to highlight revenues, revenues are up, as you maybe have seen in the press release. Backlog is good also plus 10%. So this is really a timing effect that leads to our Q1 numbers. And effectively, these one-off let's say more generally, they are -- they have an impact on which is significant because in proportion, this is, they have to be compared with numbers that are traditionally low over the first quarter.

[Emmanuel Philippe Turpin, Equity Analyst]

One follow-up, if I may. You mentioned that Q1 provided a negative base effect. What about the last 9 months of the year? Were there any sizable negative contributors, to call it, that actually will no longer be negative in the last 9 months that helped the comparison? Number 2, are you able to share with us, as far as you can see today, how much the tuck-ins will contribute in the last 9 months for Client Solution?

[Judith Hartmann, CFO & Executive VP]

So on the -- I assume you are still on Client Solutions by the sounds of it.

[Emmanuel Philippe Turpin, Equity Analyst]

Yes, I am.

[Judith Hartmann, CFO & Executive VP]

You will remember that last year we had mentioned a one-off in Canada that is going to help us quite frankly to -- with the comparison for the rest of the year, which was close to EUR 20 million. And then on your tuck-in acquisitions question, the -- it is roughly in the -- it's below EUR 50 million, but not far away from that, of the positive impact in the remainder of the year. So it's quite significant on the Client Solutions number.

[Operator]

We will take our next question from Sam Arie of UBS.

[Samuel James Hugo Arie, Managing Director and Research Analyst]

I just wanted to take the opportunity to ask you a broader question if you don't mind. Just on your experience in the last few months in wind and solar, your numbers look pretty good to us this morning. You are posting I think plus 7% in Renewables, but that's after the hydro effect and you are signaling more action to come in the second half. I'd say that's in line with what we've seen from EDF this morning with their largest renewable pipeline ever, E.ON and Energy in the last 24 hours in the sort of 20% to 30% growth range. But on the other hand, there's been this IEA report recently suggesting that the global renewables market was kind of flattening out a bit in 2018 and triggered a lot of newspaper articles and a bit of concern. But just -- would be grateful if you could share your perspective as one of the major international operators on how you see the global wind and solar market now developing, what you thought of the IEA report and what your expectations are for the market this year.

[Isabelle Kocher, CEO & Director]

Well, you have the numbers of the quarter, that's -- so I won't go back to that, but if you want. But more generally, so we see and that is very obvious in the market in our view, the fact that this market is accelerating, we have a set up a development platform that is now very good. We are, we are considered -- we are number 2 if you compare ENGIE with other European players in terms of ability to commission every year additional capacities, and you have seen that we announced this 9-gigawatts over 3 years, meaning more or less 3-gigawatts per year on average. And so we became -- it was not the case a few years ago. It was maybe not our strongest point, but we became a very solid player. The trends are relatively clear, the competition on price will continue, will be extremely high. We have decided, as you know, to focus on the most sophisticated technologies. That is the reason why we push offshore a lot and Judith mentioned some milestones we went through. We push also, I would say, advanced technologies more generally. We just inaugurated our Kathu plant in South Africa. So I believe, really that for a group like ENGIE, the solution is to focus on sophisticated projects -- sophisticated through technologies as I just said, or sophisticated because our clients are asking for more integrated offers and typically some specific profile that fit with their consumptions profile. So that's really our effort to develop a lot of capacity, yes, but focused on the most advanced solutions. And we are able to create a lot of value. You have seen our figures. We leveraged the DBpSO system in order to increase the return. And we gave a lot of details on that during our last Capital Market Day. Happy to update over the next months with new cases, and you will see that this DBpSO system allows us to increase significantly our margins. So we expect a positive trend. As Judith explained, we expect for the full year a very dynamic growth. And I believe that we have a very good start.

[Operator]

We will take our next question from Meike Becker of Bernstein.

[Meike Alina Becker, Research Analyst]

One question at this point. Regarding your strategic outlook for the U.S. and Client Solutions, if you don't mind, could you elaborate how attractive you find that market? And what your ambitions are to grow in Client Solutions in the U.S.?

[Isabelle Kocher, CEO & Director]

Thank you for your question. Very, very quickly, I would say, this is a huge market for Client Solutions. As we said during our Capital Market Day, we intend to focus on integrated solutions for companies, in particular, that are under pressure if I say that negative way to demonstrate that they take care about climate change. A lot of U.S. group started ambitious projects in this domain. And the energy saving component is a key ingredient for them. So yes we believe that this is a very promising market. By the way, we started. We started to build in this country relatively interesting business, not yet at the scale of the country, but we really intend to continue to reinforce it.

[Operator]

[Operator Instructions] We will take our next question from Vincent Ayral of JPMorgan.

[Vincent Jean Michel Ayral, Analyst]

Doing some follow up actually on the Client Solutions since we've been talking about the state. There have been some articles about Emcor. That leads to one question. Obviously, you would not comment on whether you are looking at this one or not. However, what I'm more interested in is, in the energy services, there is -- as well a part of the business which is related to construction. We have seen, for example at Suez, that when you delegate that to third-party EPC, for buildings and everything, you're still at risk. How do you see that and how do you consider this building into construction as part of the overall Energy Services? Is it really strategic or is it something you want to be less exposed to? Do you have to do it in order to gain access to certain markets and contracts? And so that would be the question regarding Energy Services and that would potentially provide us some color on Emcor.And finally as well -- and now, going back to Suez, you have a partnership in developing solar on their different real estate assets and line fields. And now, one question is, do you see further integration going forward, of the different services? Could you potentially offer waste and water services? And how do you see the convergence going?

[Isabelle Kocher, CEO & Director]

Thank you. Regarding Client Solutions, if you look at France for example, we effectively have a part of our activities in that field that is installation and this is important to have that. This is important because when you sign a big long-term contract with a company to help support the company to reduce its energy consumption, you need people to replace the installations. You need to replace the cooling systems, heating systems, lighting systems, and you cannot rely fully on outsourcing. We outsource part of that, but we need to master at least partly the way we operate. By the way, this is a good business. And I insist on the information I shared with you a few minutes ago. The backlog of our Clients Solutions more generally is still very good, so the fundamental elements of this activity are very strong. It has to be managed in a very efficient way, I think this is not new, but we are used to do so. And this is a very dynamic business. And I would say exactly the same for the U.S.Regarding Suez, nothing new. You ask the question almost every quarter, too. We say that we intend to keep our stake. We effectively want to develop our partnerships concretely on the field; we have several tenders in progress, where we partnered. And while -- we have effectively we believe a lot of things to do together and, in particular, since the move of Suez towards industrial clients. So this is something we work together with Suez team and will, of course, update progressively.

[Operator]

[Operator Instructions] Our next question comes from Emmanuel Turpin, Societe Generale.

[Emmanuel Philippe Turpin, Equity Analyst]

Again, a couple of follow-ups and details. First of all, I am very sorry, I don't know if you already gave this indication, but I was wondering about the contribution of the DBpSO to COI in Q1. Can we have the contribution please or at least whether it was up or down versus Q1 '18? And second question on Slide 12 where you show a positive contribution from the Thermal businesses, plus EUR 24 million. In the comments, you do mention that there is a positive impact from D&A related to Glow. Could we have this positive impact on D&A for Glow, please? And last, stepping back on your guidance, the parameters guiding this guidance, detailed in your footnotes, we already know about the negative weather impact in Q1 on what you expect for the remaining -- of what normalization could do in the remaining of the year. I was wondering about the impact from FX on commodity prices. Have you done the exercise of marking to market, so to speak, what the current FX on prevailing commodity prices would do compared to your budget? That would be interesting at this stage of the year.

[Judith Hartmann, CFO & Executive VP]

Okay. Emmanuel, thank you for those questions. So on the DBpSO margin, actually it is more oriented towards the end of the year. So the COI impact in Q1 was actually 0. And -- but like I said because we have signed just now one of the platforms because we're working on the others, I do feel confident that the number that we projected for the year is going to come through. You had a question on the D&A of Glow impact. The impact of the reduction of D&A on Glow is about EUR 30 million-ish. And then yes, of course, we are looking at the negative or at the positive -- negative or positive for that matter, impact of FX in commodity prices. And basically there is about, when I look at the mark-to-market for the total year, it is about EUR 90 million positive on foreign exchange and EUR 100 million, EUR 120 million negative on price. So we believe -- so we're going to obviously continue to monitor that. That's one of the risks and opportunities for the rest of the year. But so far, not that much of a significant impact for the remainder of the year. And quite frankly, even for 2020 and 2021, very similar to what I just said.

[Emmanuel Philippe Turpin, Equity Analyst]

Sorry, Judith, I didn't catch what you said on FX, did you say EUR 19 million or EUR 90 million?

[Judith Hartmann, CFO & Executive VP]

The ones that are impacting us the most are the Brazilian real and the U.S. dollar. And so there -- and from an FX perspective, so there is some slight variance. But quite frankly, it should remain within the range of what I've just mentioned.

[Emmanuel Philippe Turpin, Equity Analyst]

Sorry, did you say plus EUR 90 million or EUR 19 million?

[Judith Hartmann, CFO & Executive VP]

On the FX, plus EUR 90 million, 9-0.

[Emmanuel Philippe Turpin, Equity Analyst]

EUR 90 million. Plus EUR 90 million on FX and minus EUR 120 million on commodities. That would be mark-to-market versus budget. So one offsets the other kind of thing?

[Judith Hartmann, CFO & Executive VP]

Yes, EUR 90 million on foreign exchange and the price is 150-ish, let's call it that way. And negative between the two, but not significant. And obviously those could still move.

[Operator]

Ladies and gentlemen, there are no more questions. I now hand back over to Ms. Kocher.

[Isabelle Kocher, CEO & Director]

Well, thank you very much. Thank you for your time. Thank you for your questions. Have a good day.

[Operator]

Ladies and gentlemen, this concludes this conference call. Thank you for your participation. You may now disconnect.