Energia
EDF :2018 annual results Rebound confirmation: double-digit growth in EBITDA Cash Flow largely positive Excellent execution of the performance plan
EDF's Board of Directors meeting on 14 February 2019, under the chairmanship of Jean-Bernard Lévy, approved the consolidated financial statements at 31 December 2018.
Jean-Bernard Lévy, EDF's Chairman and CEO, stated:
The 2018 results confirm the expected rebound, mainly driven by the good performance of nuclear and hydropower output in France, the growth of EDF Renewables and EDF Trading's very strong results.
Nuclear output in France amounted to 393.2TWh, an increase of 14.1TWh over 2017. This improvement can be explained by the fact that 2017 was heavily penalised by several reactor outages linked in particular to the manufacturing records of the Creusot plant, the "carbon segregation" issue, and the temporary shutdown of the four generation units of the Tricastin power plant.
Hydropower output in France amounted to 46.5TWh , an increase of 25.4% (+9.4TWh) over 2017. After a very dry year in 2017, 2018 benefited from good hydropower conditions and an optimised availability of hydropower assets.
In the United Kingdom, nuclear output amounted to 59.1TWh, down 4.8TWh compared to 2017. This decrease can be explained in particular by the Hunterston B inspection and the extension of the Dungeness B outage.
EDF Renewables' production amounted to 15.2TWh, an organic increase of 15% compared to 2017 thanks to commissionings at the end of 2017.
In addition, EDF Trading achieved solid results by taking advantage of a context of favourable volatility in the commodities market.
The financial result corresponds to a financial expense of €4.8 billion, €2.6 billion more than in 2017. This evolution is primarily due to the change in the fair value of debt and equity on dedicated assets, which weighs on the financial result (application of IFRS 9 ) because of unfavourable market conditions, especially at the end of the year. Conversely, in 2017 the Group realised significant capital gains within its dedicated asset portfolio. Moreover, the unwinding cost recorded in 2018 is greater than in 2017 due to a more pronounced decrease in the discount rate for nuclear provisions (20 basis points in 2018 compared to 10 in 2017).
Net current income excluding non-recurring items amounted to €2.5 billion in 2018, down 13.1% compared to 2017 due to the change in the financial result (excluding the fair value adjustment of financial assets).
Net income Group share amount to €1.2 billion in 2018, down 62.9%. In addition to the variation in the financial result, this decrease is explained by the positive effect of the capital gain recorded in 2017 for the sale of 49.9% of the Group's shareholdings in CTE , without equivalent in 2018.
The good execution of the performance plan was confirmed in 2018 with the surpassing of all targets:
Together with the capital increase carried out in 2017, the performance plan significantly strengthened the Group's balance sheet and contributed significantly to the success of Cap 2030 by allocating the necessary resources to the strategy.
At its meeting on 14 February 2019, EDF's Board of Directors decided to propose to the Ordinary Shareholders' Meeting, which will be convened to approve the financial statements for the fiscal year closing 31 December 2018 and which will take place on 16 May 2019, the payment of a dividend of €0.31 per share for 2018, corresponding to a payout ratio of 50% of net income excluding non-recurring items .
When subtracting the interim dividend of €0.15 per share paid out in December 2018, the balance of the dividend to be paid out on the 2018 financial year comes to €0.16 per share for shares receiving the ordinary dividend and €0.191 per share for shares receiving the loyalty dividend.
Subject to approval at the Shareholders' Meeting, in accordance with Article L. 232-18 of the French Commercial Code and Article 25 of the Company's articles of association, EDF's Board of Directors decided on 14 February 2019 to offer each shareholder the option of being paid in new EDF stocks on the remaining dividend to be paid for the year ended 31 December 2018. In case the option is exercised, the new shares will be set at a price equal to 90% of the average of opening prices of the EDF share on the Euronext Paris regulated market over the twenty trading days preceding the day of the Shareholders' Meeting, reduced by the amount of the balance of the dividend to be paid for the 2018 financial year, rounded up to the nearest cent.
On 14 February 2019, EDF's Board of Directors set the terms of payment of the balance of the dividend for the 2018 financial year which will be submitted for approval during the Shareholders' Meeting:
If the shareholder does not exercise the option of payment in new shares between 24 May and 10 June, he or she will receive the balance of the dividend in cash on the date of its payment, i.e. 18 June 2019.
The positive cash flow target for 2018 was largely achieved and amounted to €1,125 million. This performance reflects the rebound in activity, the control of investments and the positive contribution of the working-capital requirement.
Net investments, excluding Linky , new developments and excluding the Group assets disposal plan, amounted to €10,935 million, in line with expectations.
2018 also marks an acceleration of investments in the Linky program and the Hinkley Point C project. Total net investments excluding the assets disposal plan amounted to €14 billion, down €2 billion from 2017, in line with the Framatome acquisition in 2017.
The disposals carried out in 2018 were lower than in 2017 (€1,937 million in 2018, compared with €6,193 million in 2017).
Cash flow after net investments and changes in working-capital requirement amounted to €1,299 million, a decrease of €554 million, mainly due to the lower level of disposals in 2018 compared to 2017, and, to a lesser extent, to the smaller contribution of the change in the working-capital requirement. Group cash flow amounted to -€480 million, down €271 million.
The Group's net financial debt reached €33.4 billion at the end of 2018, almost unchanged over one year. The ratio of net financial debt/EBITDA improves; it stood at 2.2x at 31 December 2018.
Sales in France - Generation and supply activities in 2018 amounted to €26,096 million, up +4.0% in organic terms compared to 2017.
EBITDA recorded an organic increase of 29.2% compared to 2017 to reach €6,327 million.
The increase in hydropower and nuclear power output had a very favourable impact on EBITDA estimated at +€1,079 million. Better conditions on the wholesale markets also contributed an estimated +€413 million improvement in EBITDA.
Conditions on the downstream market had a positive impact of +€150 million compared to 2017, as favourable price developments on new market-price offers made up for the erosion of market shares (-13.1TWh).
Price developments and the end of the tariff adjustment component on regulated sales tariff level, excluding the Energy Savings Certificate component, led to an estimated -€152 million decrease compared to 2017.
Under the EDF group's performance plan, operating expenses were reduced by €313 million (-3.5%) through the control of purchases and payroll costs. These measures are in application across all entities, notably in support functions and in the supply business, and reducing operating costs for the nuclear, hydropower and thermal power plant fleet.
A number of factors had a total effect of -€372 million on EBITDA: principally the increase in value-added tax (CVAE), movements in provisions, and positive items that were recorded in 2017 and had no equivalent in 2018.
Sales in France - Regulated activities in 2018 amounted to €16,048 million, up +1.3% in organic terms compared to 2017.
EBITDA amounted to €4,916 million, up 0.4% in organic terms compared to 2017, driven by:
EDF Renewables
Sales in EDF Renewables in 2018 amounted to €1,505 million, up 8.4% in organic terms compared to 2017.
EBITDA amounted to €856 million, up 4.1% in organic terms compared to 2017.
EBITDA from generation recorded an organic increase of 15% to €903 million, underpinned by energy production levels of 15.2TWh in 2018. This was particularly attributable to facilities commissioned in late 2017, as sales of facilities (with change of control) took place in late 2018.
Development and Sales of Structured Assets made a lower contribution to EBITDA in 2018 than in 2017. Development and support function costs increased, in order to support business growth.
The gross capacities brought into operation by EDF Renewables during 2018 totalled 1.6GW, including 0.9GW for solar power. The net installed capacities at 31 December 2018 showed a year-on-year increase of 0.5GW to 8.3GW (12.9GW gross). The gross portfolio of projects under construction at 31 December 2018 amounted to 2.4GW, consisting of 1.2GW for wind power and 1.2GW for solar power.
Group Renewables
EBITDA for all of Group Renewables amounted to €2,133 million in 2018, up 35% in organic growth thanks to a strong increase in hydropower output in France and the commissionings in 2017 in wind and solar. In terms of investments for 2018, notable acquisitions were made in offshore wind power (450MW offshore wind farm project in Scotland, acquisition of development rights in the United States) financed by the sale of a 49% minority interest in the Group's portfolio in the United Kingdom. In 2017, tne acquisition of Futuren amounted €281 million.
Dalkia
Sales in Dalkia in 2018 amounted to €4,189 million, up 8.5% in organic terms compared to 2017.
Dalkia's contribution to Group EBITDA for 2018 amounted to €292 million, reflecting organic growth of 12.0%. This increase takes into account difficulties encountered on a contract by one Dalkia subsidiary in 2017, which had no equivalent in 2018. Corrected for that factor, the organic growth in EBITDA is +1.3% driven by competitivity improvements resulting from the operating performance plan, and good control of overheads. Signatures and renewals of commercial contracts had a favourable effect on EBITDA, especially in the fields of energy efficiency and heat networks. However, Dalkia's EBITDA was adversely affected by maintenance operations at several important plants, poor weather, and unfavorable movements in prices.
Group Energy Services
EBITDA for Group Energy Services amounted to €355 million in 2018, up 10% in organic growth. This performance was mainly driven by Dalkia and to a lesser extent by the development of energy services in Italy, Belgium and the United Kingdom. The change in net investments reflects in particular the acquisition of Imtech in the United Kingdom in 2017.
Sales in Framatome in 2018 amounted to €3,313 million. A significant share of sales was realised with other entities of the Group.
Framatome's EBITDA was €465 million, including the margin realised with other EDF group entities. Framatome's contribution to Group EBITDA for 2018 stood at €202 million.
Framatome's EBITDA is supported by the implementation of the operating and structure costs reduction plan, in line with expectations. In 2018 it includes a non-recurring €42 million expense related to the revaluation of inventories undertaken in the context of Framatome's purchase price allocation.
Order intake stood at €3 billion (more than 60% from non-Group entities).
Framatome registered a good level of activity in the " ", with notable achievements in 2018 such as the delivery of the first batch of fuel cladding tubes for the Hualong-1 reactor at the Fuqing nuclear power plant. Framatome also won new contracts with Vattenfall for the delivery of fuel assembly reloads.
Thanks to the purchase of Schneider Electric's nuclear instrumentation and control (I&C) offering in North America in February 2018, Framatome is expanding its engineering expertise and broadening its portfolio of I&C solutions. It supplied a complete I&C system for unit 3 of the Tianwan nuclear power plant (a VVER type pressurized water reactor with a net installed capacity of 1,000MW). In Sweden, Framatome completed the successful commissioning of a safety I&C system upgrade for unit 3 of the Forsmark nuclear power plant
On the other hand, the " " has experienced a slight slowdown, in particular in the United States, in a highly competitive environment.
In the United Kingdom, sales amounted to €8,970 million in 2018, up 3.9% in organic terms.
EBITDA amounted to €783 million, down 15.4% in organic terms compared to 2017.
EBITDA in the United Kingdom was impacted by the downturn in nuclear power generation and the lower realised net prices for nuclear power, partly driven by buybacks in a context of higher wholesale power prices. Nuclear output for 2018 totalled 59.1TWh, down by 4.8TWh from 2017.
The supply activities benefited from increases in residential tariffs, although the residential customer portfolio showed a year-on-year decrease of -4.2% in a highly competitive environment.
In Italy, sales in 2018 reached €8,507 million, up 6.2% in organic terms from 2017. EBITDA recorded an organic decrease of 12.7% to €791 million.
In 2017, Italy's EBITDA benefited from the gain of around €100 million on the sale of Edison's Milan headquarters. After elimination of this non-recurring item, EBITDA was practically stable.
EBITDA for the electricity activities was up, essentially due to a good performance in hydropower generation and ancillary services. However, wind power generation was lower, in line with a negative price effect. The supply activity, which mainly concerns business customers, progressed despite lower margins in a more competitive market.
EBITDA for the gas activities was down, principally as a result of unfavourable prive effect that affected the margin on long-term contracts.
The exploration-production activity benefited from positive price and volume effects thanks to the rise in Brent oil prices and the commissioning of a new field in Algeria.
Sales in the Other international segment amounted to €2,411 million, up 3.4% in organic terms compared to 2017. EBITDA recorded an organic decrease of 3.1% to €240 million.
In Belgium, EBITDA showed an organic decrease of -€8 million (-5.5%). The extended outages of 4 nuclear reactors partly owned by EDF Luminus and operated by Engie group penalised EBITDA by an estimated €76 million in 2018. Thermal generation partly counterbalanced this effect, and generation of renewable energy benefited from the increase in installed wind power capacities, which totalled 440MW at 31 December 2018 (up by +17% compared to 2017). Supply activities were still marked by the strongly competitive environment, but were benefiting from growth in service activities.
EBITDA in Brazil also showed an organic reduction (-€46 million), principally due to the gas supply interruption lincked to transport capacity work, and scheduled outages in 2018 for major inspections at the EDF Norte Fluminense plant. These events made necessary significant purchases on the energy markets to cover the Power Purchase Agreement (PPA) at a time of rising market prices.
Sales in Other activities amounted to €2,601 million, up 5.3% in organic terms over 2017. EBITDA recorded an organic increase of 62.1% to reach €858 million.
EBITDA at EDF Trading amounted to €633 million in 2018, an organic increase of 73.5% compared to 2017. This growth reflects the volatility in commodity markets which EDF Trading turned to its advantage, a positive weather effect, and occasional favourable tensions in the supply-demand balance in Europe and the United States. Activities related to LNG (Liquefied Natural Gas) also contributed to this performance, thanks to rising demand in Asia and upward oil price trend until late September 2018.
EBITDA for the Other activities segment also benefited from a substantial capital gain on the final operation of the real estate sale programme initiated in 2015.
A key player in energy transition, the EDF Group is an integrated electricity company, active in all areas of the business: generation, transmission, distribution, energy supply and trading, energy services. A global leader in low-carbon energies, the Group has developed adiversified generation mix based on nuclear power, hydropower, new renewable energies and thermal energy. The Group is involved in supplying energy and services to approximately 39.8 million customers , 29.7 million of which are in France. It generated consolidated sales of €70 billion in 2017. EDF is listed on the Paris Stock Exchange.
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