EDF sales down but improvement expected in 2018

16 February 2017

French utility EDF said on 14 February that it would deliver positive cash flow next year before it has to invest in upgrading its ageing French nuclear plants and building new reactors in the UK. Announcing its financial results for 2016, EDF,  which is 85% state-owned, said group sales were €71.203bn ($75.630bn), down 5.1%. Operating profit was up 75.6% at €7.514bn, while earnings before interest, tax, depreciation and amortisation were 6.7% lower, at €16.414bn, following the temporary closure of about a third of its French reactors last year for safety checks. The group's share of net income grew 140.2% to €2.851bn on lower impairment losses and an extension to 50 years of the accounting depreciation period of its 900MWe pressurised water reactors in France.

EDF aims to reduce its operational expenditure by at least €1bn in 2019 compared with 2015. In 2016, it achieved a €0.3bn reduction in operational expenditure compared with the previous year. The group aims to reduce its operational expenditure by €0.7bn in 2018 compared with 2015. EDF said core earnings would fall further to €13.7-14.3bn this year but it expected 2018 earnings would then recover to at least €15.2bn.

CEO Jean-Bernard Levy said: “The year 2017 will still be difficult, but we should hit the bottom of the cycle and 2018, I commit to that, should be the year of the rebound."  He noted that the higher 2018 core earnings target should be achievable thanks to higher power prices, further cost cuts and the gradual return to a normal nuclear output in France. This year, French nuclear power production will be capped by planned maintenance and the continued outages of EDF's Bugey 5, Fessenheim 2, Gravelines 5 and Paluel 2 reactors, which have been shut for months to investigate safety and technical problems.

EDF has been facing heavy debts which have force it to borrow to pay dividends for several years. It had negative 2016 cash flow of €1.6bn, and €2.1bn in 2015. Levy said cost savings, asset sales, lower investments and a state-funded capital injection will boost EDF's finances by 2018. However, EDF and its Chinese partner CGN need to finance the £18bn ($24bn) construction of  UK Hinkley Point C NPP, and it also faces a €50bn upgrade of its French nuclear stations over the next decade. It also needs to spend €5bn on smart meters and  more on buying and restructuring state-owned company Areva.

Power output down

EDF's global power generation declined by 5.7%, from 619TWh to 584TWh in 2016, as a result of a 6% contraction in nuclear generation, from 483TWh to 454TWh. In France, nuclear outages (and their extensions related to additional tests) contributed to a 7.9% decline (-32.8TWh) in nuclear generation in France, from 417TWh in 2015 to 384TWh in 2016. This was partly offset by a 7.4% (+4.5TWh) increase in the UK to 65.1TWh , up 4.5 TWh.

"Nuclear generation in 2016 benefitted from the very high level of fleet availability and a historically-low rate of unplanned outages," EDF said.

UK subsidiary EDF Energy invested £529m in its eight nuclear power plants. "During a period of depressed prices, an effective carbon price floor and capacity market have been critical in giving EDF Energy the confidence to invest and extend the operating lives of these power stations, providing the UK with reliable, low-carbon electricity," it said.



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