France’s EDF posts €5.3bn loss ahead of renationalisation

EDF has reported a record €5.3bn first-half loss and warned that the financial hit from outages at its nuclear plants would worsen in the months ahead, just as the French government prepares to take full control of the utility.

The company on Thursday forecast that its output problems, exacerbated by unexpected shutdowns at some reactors being inspected for signs of corrosion, would wipe €24bn off core profits for the whole of 2022 as it resorts to expensive energy purchases on wholesale markets.

That compares with a previous €18.5bn forecast and comes on top of an estimated €10bn hit to earnings before interest, tax, depreciation and amortisation from government measures to cap electricity bills — a double whammy that will in effect wipe out EDF’s core profits for the year.

Electricity production at the former monopoly, which is 84 per cent owned by the state, has plummeted to lows not recorded in at least three decades.

The corrosion problems have added to scheduled maintenance shutdowns at some of its 56 reactors. The outages have come at the worst possible time, as Russia’s invasion of Ukraine sends energy prices soaring and Europe rushes to pivot away from Russian gas.

France has had to import more energy than usual, including from the UK. EDF, which should normally have benefited from rising electricity costs, is instead struggling with deepening financial problems.

First-half sales rose 67 per cent year on year to €66.2bn. But with the group forced to buy high-priced energy on the market, ebitda fell to €2.7bn, down almost 75 per cent from the first half last year.

Chief financial officer Xavier Girre said ebitda would be even weaker in the second half of 2022 as wholesale prices soar.

Outgoing chief executive Jean-Bernard Lévy — who will be replaced as the government prepares to buy out the 16 per cent of EDF it does not already own by the end of October — said the “unbelievably volatile” price situation showed Europe’s energy market design needed overhauling.

“The market as designed maybe sort of worked during normal periods. But with war in Ukraine, no doubt, the market design needs a good chunk of repairs or maybe a total reshuffle,” Lévy said.

The French government has joined countries such as Spain in calling for the decoupling of gas and electricity prices in Europe.

EDF, which has long been weighed down by a large debt pile, is due to return to government hands through a tender offer worth almost €10bn.

The French government has said it wants to take full control of EDF again to put it in a better position to make looming investments and move faster on big projects. France’s plan to build at least six new nuclear reactors in the coming decades — a task that will fall to EDF — is integral to reaching its targets for cutting greenhouse gas emissions. The UK has also commissioned the French group to build more reactors.

EDF’s deepening financial problems have added to the urgency of shielding the group from the glare of markets, say analysts and people close to the group. The company will probably require further capital, they said, and will also have to refinance some of its debts next year.

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