If power companies were rewarded for not pumping out planet-warming carbon dioxide, then Electricite de France SA would be a prince among paupers. Nuclear and renewables accounted for 88 percent of the French utility’s output last year, whereas coal and fuel oil contributed just 4 percent. Yet EDF is far from being electricity world royalty. Instead, it resembles a weary performer struggling to keep an array of china plates spinning overhead, while being barked at by a government circus-master. On Monday, EDF shares sank 11 percent after it warned that a measure of next year’s profit might be as much as 4 percent lower than expected. That might seem a stock-market overreaction, unless you’re familiar with EDF’s cornucopia of problems. In reality, the share slump merely reflects understandable fears about the highly indebted group. EDF has about 31 billion euros ($36 billion) in net debt and 21 billion euros of pension obligations. It faces a 50 billion-euro bill to upgrade France’s aging nuclear fleet, plus massive future decommissioning costs. Meanwhile, it must stump up most of the 19.6 billion-pound ($25.7 billion) cost of two new nuclear reactors at Hinkley Point in the U.K. True, four-fifths of EDF shares are still owned by the French state, which offers some protection. But it’s hard to feel comfortable about a utility that is struggling with cash flow. EDF expects to generate little if any cash next year, meaning net debt will remain at an elevated 2.7 times Ebitda. Questions haven’t gone away about how EDF can deliver Hinkley on time and on budget, judging by its efforts elsewhere.
Bloomberg 13th Nov 2017 read more »
