Asset sales boosted profits at French utility group EDF last year, offsetting a fall in revenues caused by a drop in nuclear and hydropower output in its domestic market and what the company described as “unfavourable price conditions in almost all geographic areas where the group is active”.
France’s dominant electricity provider has faced more competition alongside increasing pressure from the government to increase its use of renewable energy as the country has sought to reduce its reliance on nuclear energy, long the mainstay of national energy policy.
EDF still serves 85.5 per cent of France’s residential customers. That represented a net loss of around one million customers, however, with the group trying to put a positive spin on fiercer competition both in France and in the UK, Belgium and Italy, describing its efforts as “resisting well”.
EDF has responded to the broader structural challenges by announcing a significant push into solar power at a cost of up to €25bn together with green electricity tariffs — but has also been pressing forward with an ambitious cost-cutting plan announced in April 2016.
Operating expenses were €431m lower in the year to December 2017 than the previous 12 months, the utility said on Friday, and it had now completed more than 80 per cent of a disposal scheme raising €8.1bn between 2015 and the end of the latest financial year.
Revenues, however, were also lower at €69.6bn compared to €71.2bn in 2016 — a fall of 2.2 per cent, although that was skewed slightly lower by a prior year tariff adjustment by the French government. Net income climbed 11 per cent to €3.2bn, but the majority of that was driven by non-recurring items. Stripping those out, net income dropped by 31 per cent from €4.1bn in 2016 to €2.8bn in 2017. Earnings before interest, taxation, depreciation and amortisation dropped 16.3 per cent.
Problems with revenues from nuclear power were not confined to France, however. The decline in earnings was most marked in the UK, where EDF is the main operator of nuclear power plants. Ebitda dropped by a third in the country on an organic basis, “mainly due to the impact of lower realised nuclear prices”, it said.
Other than its renewables division, the only business to record an increase in organic Ebitda was Italy, which benefited from “favourable trends in electricity sale prices and the optimisation of the gas fired fleet”. Hydrocarbon exploration-production activities, boosted by higher oil and gas prices, also added to revenues in the southern European state.
Chairman and chief executive Jean-Bernard Lévy said the group expected a rebound in 2018, but the predicted decline in nuclear generation in France in 2019 meant that the group would increase its target for cost savings to help offset the hit to revenues.
“We are beginning an unprecedented acceleration in renewable energies with the launch of EDF’s Solar Plan, at the same time that we are strengthening our commercialinitiatives,” Mr Lévy said. “Supported by our staff dedicated to working in the service of the energy transition and by a newly reorganized nuclear industry, EDF now enjoys a solid basis to achieve the rebound expected in 2018.”
Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.