EDF: The fall in prices will weigh after an “exceptional” 2023 financial year

by Benjamin Mallet

PARIS (Reuters) – EDF announced on Friday a net profit of 10 billion euros for 2023, thanks in particular to the rise in electricity sales prices, but the group warned that their fall on the markets would weigh on its performance in 2024.

As indicated by sources to Reuters, the public electrician also admitted that this fall did not facilitate the signing of medium and long-term contracts with its customers and with its competitors – such as Engie or TotalEnergies -, yet at the heart of its new strategy, because potential buyers prefer to stock up in the short term.

“When short-term prices (fell) at the speed they have experienced for two months, we did not see a huge demand emerging,” said its CEO, Luc Rémont, during a press conference.

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“But it’s not necessarily very wise to say that we’re ‘sourcing’ ourselves in the short term, because if prices rise tomorrow for reasons that we can’t predict, those who haven’t done so “efforts to (…) secure (their) supply in the medium term will once again find themselves in an upward cycle,” he added.

Evoking “exceptional results”, EDF recorded for 2023 a net profit share of the group of 10.0 billion euros (compared to a loss of 17.9 billion in 2022), a profit before interest, taxes, depreciation and depreciation (Ebitda) of 39.9 billion (compared to -5 billion) and a turnover of 140 billion (-2.1%).

The group has, however, forecast a drop in its Ebitda this year, due in particular to a negative “price effect” of 8 to 11 billion euros.

“We are not considering a floor price for electricity. On the other hand, if electricity prices were permanently low, it would obviously be appropriate to question the state of demand and the state of electricity economy to know how to finance investments. This question should be asked,” said Luc Rémont.

“FIND A WAY” WITH LONDON

EDF, of which the French State once again became the sole shareholder last June, also had to record a depreciation of 12.9 billion euros (7.9 billion after taxes) linked to the new delays and additional costs of the power plant project. British nuclear power plant from Hinkley Point C and goodwill from EDF Energy.

While sources said France wanted a new financial contribution from the British government to EDF’s nuclear power plant projects in Britain, Luc Rémont said the group was discussing long-term financing of Hinkley Point C with London. (HPC) and Sizewell C, a project for which it has not yet made an investment decision.

Stressing that HPC remained “a profitable project” for EDF, he also declared himself confident in the ability of the group and the French government to reach an agreement with Great Britain.

“We are in a partnership relationship with the British authorities, it is in the interest of the British authorities that we are a solid partner to carry out this project in the best conditions. And therefore, I am confident in the fact that we will find a way with the British authorities, both on Hinkley Point and Sizewell.”

EDF’s net financial debt fell significantly, to stand at 54.4 billion euros at the end of 2023, compared to 64.5 billion at the end of 2022, while its cash flow reached 9.3 billion l last year (compared to -24.6 billion), which enabled it to finance net investments of around 19 billion.

For 2026, the group is targeting net financial debt to Ebitda of less than or equal to 2.5 times (compared to 1.36 at the end of 2023) and adjusted economic debt to Ebitda of less than or equal to 4 (compared to 2.26).

After recovering the production of its French nuclear fleet in 2023, EDF has also confirmed its objectives in this area, in the ranges of 315 to 345 terawatt-hours (TWh) in 2024 and 335 to 365 TWh for 2025 and 2026.

(Reporting by Benjamin Mallet; edited by Zhifan Liu and Jean-Stéphane Brosse)