by Benjamin Mallett
PARIS (Reuters) – EDF announced on Friday a capital increase project of around 2.5 billion euros, largely subscribed by the State, the group having to face a low availability of its nuclear fleet and the impact of government decisions to limit the rise in electricity prices.
The Minister of Economy and Finance, Bruno le Maire, clarified on RTL that the French State would participate for around 2.1 billion euros in the operation, which the group intends to launch “as soon as possible” and which will result in the issuance of approximately 510 million new shares.
EDF, in which the State holds 83.9% of the capital, specified that the expected drop in its nuclear production in France this year, linked in particular to corrosion problems on safety circuits, should penalize its profit before interest, taxes , depreciation and amortization (Ebitda) in the amount of 11 billion euros, according to estimates that are very sensitive to market prices and which will therefore be updated.
The executive’s decision to force it to cede more electricity at low prices to its competitors to cap prices should also have a negative impact of 8 billion euros, while the high prices would benefit it up to 6 billion.
The group, which has to face significant financing needs to extend the life of its French nuclear fleet, build new reactors and develop further in renewable energies, also plans to proceed with around 3 billion euros of disposals in three years, over the period 2022-2024.
The State also undertakes to continue to receive its dividends in securities for 2022 and 2023, thus leaving several billion euros in the coffers of the company as it has done since 2015.
The recapitalization announced Friday “is also a message that is sent to private investors to tell them ‘you can continue to finance EDF and invest in EDF because EDF has the support of the State'”, estimated Bruno Le Maire.
Around 9:20 a.m., the action of the public electrician however fell by around 4% after having already lost nearly 19% since the start of the year.
SHARP INCREASE IN RESULTS IN 2021
“We have difficulties in the years 2022 and 2023, the action plan aims to overcome them and to ensure that we do not pause in our investments for the energy transition (…)”, declared during of a conference call its CEO, Jean-Bernard Lévy.
At the same time, EDF published sharply higher results for 2021, driven by a rebound in demand, nuclear production and prices, with net income group share of 5.1 billion euros (vs. 650 million euros in 2020), a net current result of 4.7 billion (against 2.0 billion), an Ebitda of 18.0 billion (+11.3%) and a turnover of 84.5 billion (+22.4%).
The group’s net financial debt reached 43.0 billion euros at the end of 2021 and its cash flow stood at -1.5 billion euros last year.
After having seen the government put on hold in July its plan to reorganize EDF’s “Hercules”, which was to give the group new means of financing, Jean-Bernard Lévy reaffirmed on Friday the need for a “major reform” which “will certainly be quite close to the top of the pile of subjects that will be dealt with by the government” resulting from the presidential and legislative elections.
EDF has revised its outlook for nuclear production in France several times since the start of the year, with levels of 295 to 315 terawatt-hours (TWh) expected in 2022 and 300 to 330 TWh in 2023, at compare with 360.7 TWh recorded in 2021.
The group has been repeatedly downgraded by rating agencies and has had to carry out major asset sales in recent years. It had also already had to implement a capital increase of 4 billion euros in 2017, 3 billion of which had been subscribed by the State.
EDF does not provide precise earnings forecasts for 2022 but the group hopes to restore its debt ratios in 2023 in order to support its rating and preserve its ability to borrow under good conditions.
(Report Benjamin Mallet, edited by Blandine Hénault and Jean-Michel Bélot)