Energy

Reform is 'indispensable,' EDF says after France puts off overhaul

3 minute read

The company logo of Electricite de France (EDF) is seen on the facade of EDF's headquarters in Paris, France, July 22, 2021. REUTERS/Sarah Meyssonnier

PARIS, July 29 (Reuters) - A thorough reform is vital if France's state-backed utility EDF (EDF.PA) is to retain its role as a major player beyond the short term, its CEO said on Thursday after the government delayed an ambitious overhaul.

Shares in EDF (EDF.PA) fell more than 4% as uncertainty over the reform overshadowed strong earnings for the first half of the year.

Union and sources said on Wednesday that the French government, which owns nearly 84% of the utility, will not move ahead with the restructuring plan in the near future, making it all but impossible to pass a reform bill before President Emmanuel Macron's term ends in 2022. read more

The reform, involving a broad restructuring of the group and the mechanism through which it sells nuclear power, was supposed to help debt-laden EDF flourish as it competes with rivals investing in clean energy.

"I regret that this reform that is indispensable to EDF cannot happen now," CEO Jean-Bernard Levy told a small group of reporters, saying talks between the government and the European Commission - whose green light was needed - had not made enough progress for the government to able to put forward a draft law to overhaul EDF.

"Our short term is guaranteed, our medium and long term isn't if we want to play in the first league - which is what is expected of EDF," Levy said.

He told analysts there would be more discussions later in the year, but declined to give any precise timeframe.

SAFE FOR NOW

The company is nevertheless in a better immediate situation than anticipated.

"Our economic performance is better than we expected at the start of the year," he said, pointing to strong results for the first half of the year, lifted by an increase in demand, prices and nuclear production.

EDF's earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at 10.6 billion euros for the first half of the year, up more than 29% from a year earlier, helped by a gradual recovery of the economy as COVID-19 restrictions eased in France.

EDF maintained the 2021 financial guidance which it had updated on July 7. That includes aiming for earnings before interest, tax, depreciation and amortisation of more than 17.7 billion euros, up from a previous target of more than 17 billion. read more

Adding to that, financial director Xavier Girre said that if forward electricity market prices for baseload generation remained above 60 MWh for the rest of the year, the positive effect for the group could be "in the magnitude of one billion euros" in 2022 compared to 2021.

The French government needs EU clearance to make sure a new structure would not amount to state aid or restrict competition in a power market still largely dominated by the former monopoly operator.

The group also announced the extension of 1,300MW French reactors' depreciation period to 50 years.

"The Group changed this accounting estimate on 1 January 2021, for all 1,300MW series plants. The impact of the 50-year depreciation period extension on net income - Group share is +194 million euros," EDF said in a statement.

Reporting by Benjamin Mallet and Ingrid Melander; Additional reporting by Sarah Morland, Editing by Kevin Liffey and Barbara Lewis

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