February 14, 2020 / 7:32 AM / 2 days ago

France's EDF flags further rise in earnings after 2019 figures beat forecasts

PARIS (Reuters) - French utility EDF’s (EDF.PA) core earnings rose 12% last year, beating expectations, on stronger power prices in Britain and France and a positive performance from its renewable energy division, it said on Friday.

FILE PHOTO: The EDF logo is seen on a reactor building at the Tricastin nuclear power plant site in Saint-Paul-Trois-Chateaux, France, June 27, 2019. REUTERS/Benjamin Mallet/File Photo

The group expects to maintain earnings growth this year, Chief Executive Jean-Bernard Levy told journalists, with core profits seen rising nearly 8% at the top end of its forecasts.

EDF shares surged 6.6% at the open on the Paris bourse after the results on Friday.

The state-controlled utility said 2019 revenue rose 4% to 71.3 billion euros ($77.3 billion) and core earnings before interest, tax, depreciation and amortization (EBITDA) jumped 12.1% to 16.7 billion euros.

Its 2019 group net profit was 5.2 billion euros compared with 1.1 billion euros in 2018.

A Refinitiv poll of analysts expected EDF’s average group net profit to come in at 3.0 billion euros, and EBITDA at 16.3 billion, while turnover was seen at 70.9 billion.

“The 2019 results confirm the rebound seen in 2018. All our objectives were met,” Levy said on Friday.

He said he expects the group to keep up its strong performance in 2020, with core earnings forecast to come in at between 17.5 billion euros and 18 billion euros, while net investments are expected at around 15.5 billion euros.

The outlook was supported by good visibility on pricing over the next two years, he said, and an expected 2.4% increase in regulated power tariffs in France this year.

EDF was expecting to sell assets worth around 2 billion to 3 billion euros in the 2019 to 2020 period, Levy said.

JPMorgan analysts said in a note that the market will be pleased by the solid 2020 EBITDA guidance from the utility, whose earnings report missed estimates a year ago.

“We believe that whilst recognizing the significant recent advances in EDF’s re-regulation/restructuring story, the market was wary of a repeat of last year were the guidance materially below expectations,” JPMorgan said.

“This risk is now ruled out, and investors can focus on fundamentals and related news flow expected this year,” it added.

Levy said EDF’s planned restructuring, which could see the group split in two, would depend on the implementation of French energy market reform.

(GRAPHIC: EDF Core earnings - here)

He said the company had entered a phase of consultation with employee representatives and would fine-tune the restructuring plan.

EDF will be able to make concrete proposals only if the government and the European Commission have an agreement on future regulation the French energy market, Levy said.

The utility said its earnings were adversely affected by a decline in nuclear generation in France and Britain due to prolonged nuclear reactor outages, and by poor hydro power conditions in France.

However, Chief Financial Officer Xavier Girre said the effects of low nuclear power output were limited because of mild weather conditions which reduced the need for it to buy power in the spot market to cover its clients’ needs.

Nuclear power generation in its main market in France fell by a greater-than-expected 3.5% in 2019 to 379.5 terawatt hours (TWh).

The group said on Thursday that 2020 nuclear power generation in France is seen at between at 375 TWh and 390 TWh.

Its net financial debt amounted to 41.1 billion euros at the end of December 2019, it added, an increase of 7.7 billion euros year-on-year.

FILE PHOTO: French state-controlled utility EDF Chief Executive Jean-Bernard Levy speaks during a news conference to release the Folz report about EDF's long-delayed Flamanville nuclear plant, at the Bercy Finance Ministry in Paris, France, October 28, 2019. REUTERS/Charles Platiau/File Photo

EDF proposed a dividend of 0.48 euros per share for 2019, which corresponds to a payout ratio of 45% of its net income.

(GRAPHIC: EDF's nuclear power generation in France - here)

Reporting by Bate Felix and Benjamin Mallet; Editing by Tom Hogue and Jan Harvey

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