EDF profits fall

19 February 2018

State-controlled Electricite de France (EDF) on 16 February announced a net profit of €2.8bn ($3.4bn) for 2017, a 31% decrease compared with 2016, which it attributed to low prices and a sharp decline in nuclear and hydroelectric production. However, it was better than analyst estimates of €1.76bn. Earnings before interest, taxes, depreciation and amortisation (Ebitda) will increase to €14.6-15.3bn in 2018, EDF said, reiterating a November forecast. Ebitda fell 16% to €13.7bn in 2017.

 UK profits, which include  EDF Energy, fell by a third on a €579m decrease in sales to €8.68bn. This was in part because UK customers pay their bills in sterling while the company reports its results in euros. EDF said the decline of the pound against the euro had cost it €608m.

However, the company expects profit to rebound in 2018 as a result of higher power prices and improved availability of its French nuclear reactors after lengthy stoppages for safety checks in 2017. EDF CEO Jean-Bernard Levy said on a conference call: “2018 will be the year of the rebound on solid bases - 2017 is the low point.”

Chief Financial Officer Xavier Girre said EDF’s tax bill was cut by €1.2bn in 2017 because of lower tax rates in the USA and Belgium, favourable tax treatment on the sale of its 50% stake in France’s power grid operator and a government reimbursement of a dividend surcharge.

EDF is attempting to slash costs and prolong the life of nuclear reactors amid depressed European power prices and increasing competition, Bloomberg said. Although the government wants to reduce dependence on nuclear power, EDF plans to invest €48bn between 2014 and 2025 to keep most plants operating for at least an additional ten years.

The company said its nuclear output in France would recover to more than 395TWh in 2018 after falling 1.3% to 379TWh in 2017. However, the output is expected to fall again in 2019 when EDF closes its Fessenheim nuclear plant as the new Flamanville EPR starts operation. Next year will also see several large-scale maintenance outages. EDF explained that it had extended unplanned outages as well as longer-than-expected maintenance outages last year at several of its 58 nuclear reactors in France, while the nuclear regulator ordered several months’ closure of four reactors at Tricastin for safety reasons.
EDF cut operating expenses by €700m in 2017 compared with 2015. It confirmed plans for a further €100m of cost cuts in 2018 but increased its 2019 target by €100m to achieve €1.1bn of savings compared with 2015. EDF raised funds in 2017 by selling half of its stake in the French power-grid operator, coal-fired power plants in Poland and some other assets. At the same time, it bought 75.5% of Framatome, Areva’s nuclear reactor business, and took control of wind farm operator Futuren, as well as Imtech’s UK and Irish units.

EDF said it had strengthened of the French nuclear industry in 2017 by the acquisition of Framatome and by winning regulatory approval for the resumption of manufacturing of forged components at the Creusot site as well as by "progress on track" with the Flamanville 3 project. It also noted the government's delay of the 2025 target on reducing the share of nuclear power from 75% to 50% ahead of the multi-year energy plan.

EDF-Framatome by 2020 will present an optimised European pressurised reactor (EPR) intended to be as safe but less expensive (around €6bn) than the first version being built in France, Finland, China and the UK. Levy said he had not been asked by the government to review the company’s structure, despite the previous speculation of a split between its nuclear and renewables business.

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