“A real shock”, a measure which “imposes itself” on EDF which “fought a lot”. The words used by Jean-Bernard Levy, the CEO of EDF, in front of the executives of the company, are strong. To the extent of the impact on its accounts of the decision of the State to oblige the group to sell more nuclear electricity at low prices to its competitors to contain the electricity bill of the French. They also reflect the impotence of a company more than 80% owned by the State in the face of a political decision by the State-shareholder which goes against its interests (and that of the other shareholders).
EDF has made other proposals
To limit the increase in regulated electricity tariffs (TRV) to 4% on February 1 as it had promised, the government announced on Thursday that it would increase the volumes ‘EDF must cede to its competitors within the framework of the Arenh system (regulated access to historical nuclear electricity), a measure likely to have an impact of 7.7 to 8.4 billion euros on the group’s results.
“After having fought it a lot, we experience this decision as a real shock,” said CEO Jean-Bernard Lévy in a message to EDF managers, unveiled by Archyde.com and obtained by La Tribune, stressing that the measure “imposes itself” on the group when it defended “targeted alternatives for the benefit of customers most sensitive to price increases, mainly VSEs and the most exposed factories”.
In parallel with the government’s announcement, EDF has revised down its nuclear production outlook for 2022 – due to reactor shutdowns linked to corrosion problems -, as well as a new delay and additional cost of the project. Flamanville EPR (Manche). Bad news that caused the stock market to fall by almost 15% on Friday and again by more than 4% on Monday.
The group is shaken
The group recently extended the outage period of 5 of its 56 reactors in its French nuclear fleet, which led it to revise downwards its nuclear production forecast for 2022. Today, ten of these reactors are shutdown for maintenance or other, i.e. 20% of French nuclear production capacity.
“These bad news are shaking the group,” said Jean-Bernard Lévy.
“With the executive committee, we are examining the appropriate measures to strengthen the group’s balance sheet structure and any measure likely to protect its interests. What is at stake is our ability to preserve our strategic development. We expect to make these measures public within a month.”
The CEO also writes that he “shares (the) emotion” of those who have expressed “their support, even their indignation”, adding that the executive committee and himself remain “very combative”.
Unions outraged
The CFE-CGC, as well as the association Energie en actions, which represents employee shareholders and former employees of EDF, have made it known in recent days that they reserve the right to take legal action against the government’s decision on the Arenh. The union representatives of the employees on the group’s board of directors also said they were “scandalized” by the announcements of the executive and demanded that the State “fully” compensate for the cost of these measures for EDF.
The management of EDF has already experienced a serious setback last summer when the government put on hold the project to reorganize the group, named “Hercule”, which was supposed to accompany a new regulation of the French nuclear fleet.
EDF considers that the current Arenh system constitutes a “poison” for it, forcing it into debt and limiting its investment capacity while subsidizing its competitors.
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IN THE SIGHTS OF RATING AGENCIES
The rating agencies Fitch and Standard and Poor’s (S&P) have sanctioned the EDF group, or are preparing to do so, after a series of bad news last week. Fitch downgraded EDF’s long-term debt rating by one notch to “BBB+” on Monday and also gave that rating a negative outlook, meaning the agency could downgrade it further in the future. In the process, S&P Global Ratings announced that it would not rule out lowering its rating by one notch in turn, after the publication of EDF’s annual results on February 18.
Rating agencies have been concerned since EDF announced on Thursday that it had suspended one of its financial forecasts: that of its ratio of net financial debt to gross operating surplus (Ebitda), which it does not is more certain to hold, the French government asking him to sell more electricity at low prices to his competitors.
Fitch also points to the “prolonged shutdowns of certain nuclear reactors, which will significantly erode margins at least for 2022”.
“We estimate this will leave Fitch’s 2022 Ebitda at around €4 billion, 75% lower than our previous estimate, and a weakened financial structure for EDF,” the ratings agency said in a statement. communicated.
S&P also estimates that the EBITDA published by EDF could be 10 to 13 billion euros lower than the 18 billion forecast so far.
(with Archyde.com and AFP)