Energia
Edf: 2020 HALF-YEAR RESULTS , Resilient EBITDA and limited decline in recurring net income in the first half of the year , Implementation of a cost reduction and disposal plan
2020 HALF-YEAR RESULTS
Strong mobilisation of the Group during the crisis
Continued growth in renewables
Resilient EBITDA and limited decline in recurring net income in the first half of the year
Implementation of a cost reduction and disposal plan
Adoption of the Group's “Raison d'être”
Financial results of the 1 half of 2020
Sales €34.7bn
-4.9% org.
EBITDA €8.2bn
-1.6% org.
Net income excluding non-recurring items €1.3bn
-9.6%
Net income – Group share - €0.7bn
-
Highlights
1/ Strong mobilisation of the Group during the health crisis
2/ Continued growth in renewables
3/ Nuclear developments
4/ Customers and services
5/ Numerous international successes, especially in hydropower
6/ Adoption of a cost reduction and disposal plan to mitigate the effects of the health crisis
EDF's Board of Directors meeting on 29 July 2020, under the chairmanship of Jean-Bernard Lévy, approved the condensed consolidated financial statements at 30 June 2020.
Jean-Bernard Lévy, Chairman and Chief Executive Officer of EDF stated : “Throughout the public-health crisis, EDF's employees poured all their energy into fulfilling their essential duties in support of our customers in all countries where we operate. Despite the economic downturn, the impact of the crisis on our main financial indicators remains contained, attesting to the resilience of our Group. These conditions require us to adopt a cost savings and disposal plan enabling us to pursue the deployment of our CAP 2030 strategy and keep our debt under control. The decarbonisation of the economy, which combines the fight against global warming and sustainable growth, is a real development opportunity for EDF.”
Change in EDF group results
Change in EDF group's EBITDA
EBITDA for the first half of 2020 was down slightly compared to the first half of 2019. Despite lower nuclear output in France, it benefited from better price conditions in the United Kingdom and France, as well as from better hydrological conditions. The health crisis affected the Group's EBITDA by an estimated €1,010 million at the end of June 2020, mainly due to lower nuclear output, the drop in demand affecting electricity distribution and supply activities, as well as the slowdown or postponement of work and service activities with customers.
O perational performance
Nuclear output in France amounted to 174.0TWh, down 29.7TWh compared to the first half of 2019 (of which around 13TWh due to the health crisis).
Hydropower output in France amounted to 26.0TWh , up 29.4% (+5.9TWh) compared to 2019, which had experienced unfavourable hydrological conditions in the first half of 2019.
In the United Kingdom, nuclear output was 22.7TWh, down 1.8TWh compared to the first half of 2019. This decrease is due to the schedule of maintenance operations and planned outages. Output was still negatively impacted by the outages of Hunterston B and Dungeness B.
In Belgium, both nuclear and wind output were up.
EDF Renewables' output amounted to 7.9TWh (+0.6TWh), i.e. a change of +7.4% in organic terms, driven by new wind and solar capacities commissioned at the end of 2019 (USA, Canada, France, India) and by good wind and solar conditions.
Adoption of a cost reduction and disposal plan
To mitigate the impact of the health crisis on the Group's financial situation, a cost cutting plan and a disposal plan are been implemented. They aim at making a further effort to cut costs, with a target of €500 million in reductions to operating expenses between 2019 and 2022, and a stabilisation of net investments to around €15.0 billion on average per year over 2020-2022.
In addition, further asset disposals will be initiated, with the aim of approximately €3 billion over the period 2020 to 2022.
This action plan aims to sustain the continued deployment of the CAP 2030 strategy while ensuring the solidity of the Group's balance sheet, by maintaining a ratio of financial debt to EBITDA of around 3x each year during the 2020-22 period.
Prospects for reforming the existing nuclear regulatory framework in France
Discussions are continuing between the French State and the European Commission on the overhaul of the regulation of the French nuclear fleet, with no certainty of success at this stage. The aim is to define an appropriate and balanced regulatory framework that would also lead to a reorganisation of the Group's activities in order to strengthen its capacity to invest in the energy transition.
Net income and dividend
The financial result represents an expense of €2,302 million in the first half of 2020, an unfavourable change of €2,171 million euros compared to the first half of 2019, mainly due to the negative change in fair value of the dedicated assets portfolio (€2,631 million) in a context of deteriorated financial markets. As a reminder, this change in fair value is not included in the calculation of net income excluding non-recurring items.
Net income excluding non-recurring items stood at €1,267 million at the end of June 2020, down €135 million from the first half of 2019. This change reflects the decline in EBITDA and the increase in depreciation and amortisation, which were partially offset by an improvement in recurring financial income due to the stability of the real discount rate at 30 June 2020 compared to a decline at 30 June 2019.
Net income – Group share amounted to -€701 million at the end of June 2020, due mainly to non-recurring items.
The Group will not distribute an interim dividend in 2020. It is maintaining its payout ratio target for net income excluding non-recurring items between 45 - 50% for 2020 to 2022, with the French State opting for script dividends relating to 2020 an 2021 fiscal year.
Cash flow and net financial debt
Group cash flow stood at -€1,889 million at the end of June 2020 (compared to +€1,047 million at the end of June 2019) mainly due to the deterioration in working capital requirements of -€1,364 million. This was essentially attributable to the increase in working capital requirements related to the CSPE as a result of significant renewable output in France in a context of low prices in the first half of 2020 (-€715 million).
Net investments, excluding disposals, and excluding HPC and Linky, amounted to €5,875 at the end of June 2020. Total investments, including HPC and Linky, amounted to €6,988 million.
Cash flow from operations amounted to €597 million, down €1,908 million compared to the first half of 2019.
Main Group results by segment
France – Generation and supply activities
Sales in France - Generation and supply activities at the end of June 2020 amounted to €14,449 million, up 1.0% in organic terms compared to the first half of 2019.
EBITDA was down organically by 1.9% compared to the first half of 2019 and amounted to €3,894 million.
Overall, the health crisis affected the EBITDA of the France - Generation and supply activities for an estimated -€482 million due to lower nuclear availability (around -13TWh), lower consumption and estimated increase in bad debts.
The decrease in nuclear output (around -17TWh excluding the impact of the health crisis) partially offset by the increase in hydropower output (+5.6TWh after deduction of pumped volumes) had an unfavourable effect estimated at -€494 million.
The postponement of planned unit outages in 2020 will also affect the maintenance programme in 2021 and 2022 (for which the nuclear output forecast is estimated at between 330 and 360TWh each year) . In regards
the “Grand Carénage” programme, the feedback from the VD4 900MW, as well as ongoing discussions with the ASN, could lead to additional investments in the coming years under this programme, which is currently under review.
This change was partialy offset by the positive energy price effects for an estimated €709 million due to the tariff increases in June 2019 and February 2020 (the latter including half of the tariff catch-up in the first half of 2019) and favourable conditions on the spot market.
On the downstream market, the erosion of market share was more than offset by the positive change in capacity prices and the lower cost of the Energy Saving Certificates component for an overall favourable amount estimated at +€302 million.
Operating expenses were down €84 million, i.e. -2.2%, mainly due to headcount decrease and optimisation of the real estate portfolio.
In addition, various other items had a negative impact of - €196 million on EBITDA.
As regards Flamanville 3, in the context of health crisis, all construction activities have been temporarily interrupted between mid-March and early May, which could result in further delays and additional costs. The instruction of the upgrading of the main secondary system welds and other technical issues is ongoing and remains subject to ASN approval.
France – Regulated activities
Sales in France - Regulated activities at the end of June 2020 amounted to €8,139 million, down 2.0% in organic terms compared to the first half of 2019.
EBITDA amounted to €2,460 million, down 4.6% in organic terms compared to the first half of 2019.
The decline in distributed volumes and network connection services reflects the impact of the health crisis on business. This was estimated at a total of -€212 million at the end of June 2020.
The climate effect had an estimated unfavourable impact of -€152 million.
The change in prices has a positive effect of +€223 million, in line mainly with the favourable indexed adjustments to the TURPE 5 distribution and transport that took place on 1 August 2019.
Renewable Energies
EDF Renewables
Sales at the end of June 2020 for EDF Renewables amounted to €770 million, up 5.0% in organic terms compared to the first half of 2019.
EBITDA amounted to €418 million, up 14.1% in organic terms compared to the first half of 2019.
The health crisis had no significant effect on EDF Renewables' business.
This strong increase is due, on the one hand, to growth in EBITDA of generation (€471 million, i.e. organic growth of +6.9%) driven by generation volumes representing 7.9TWh (+7.4%), and, on the other hand, to the “Development and Sale of Structured Assets” operations that remained robust in the first half of 2020, mainly in the United States.
The gross portfolio of projects under construction reached 5.9GW, of which 3.1GW in onshore wind power, 1.6GW in offshore wind power, and 1.0GW in solar.
Group Renewables
EBITDA of all of the Group's Renewables amounted to €859 million in the first half of 2020, an organic decrease of -2% due to unfavourable price conditions on the spot market for hydropower generation in France. This effect was only partially offset by favourable hydrological conditions (+29.4 % compared to the first half of 2019) and increased renewable generation (wind and solar) benefiting from commissioning and better wind and sun conditions.
Net investments increased due to the accelerated development of EDF Renewables in the United States and a smaller amount of subsidies than in the first half of 2019.
Energy Services
Dalkia
Dalkia's sales at the end of June 2020 amounted to €1,988 million, down 14.3% in organic terms compared to the first half of 2019.
EBITDA amounted to €165 million, down 14.9% in organic terms compared to the first half of 2019.
The change in EBITDA reflects the impact of the health crisis on sales volumes of energy and services, in connection with the closure of many customer sites and the postponement of construction work (estimated at -€39 million).
It should be noted, however, that the heating network and energy services businesses were resilient, as Dalkia remained mobilised together with its customers, notably to support the continuity of essential services such as in the hospital sector.
Group Energy Services
Energy Services EBITDA amounted to €188 million in the first half of 2020, representing an organic decrease of 20% due to the impact of the health crisis on the operations of Dalkia, Edison and Luminus.
The increase in net investments was mainly due to the acquisition of Pod Point in the United Kingdom. It was only partially offset by the postponements of Dalkia's construction works due to the health crisis.
Framatome
Framatome's sales at the end of June 2020 amounted to €1,490 million, down 4.6% in organic terms compared to the first half of 2019.
Framatome's EBITDA amounted to €211 million in the first half of 2020, i.e. an organic increase of +0.9% (including the margin realised with EDF group entities). Framatome's contribution to the Group's EBITDA amounted to €98 million, up 28.4% in organic terms compared to the first half of 2019.
The health crisis is impacting the “Installed Base”, “Fuel” and “Projects and Component Manufacturing” businesses for a total estimated amount of -€37 million in EBITDA. These effects were partially offset by lower overhead expenses due to the health crisis.
The growth in EBITDA mainly reflects a better product mix and an unfavourable calendar effect in the first half of 2019 on the Fuel business. EBITDA also benefited from the continuation of the plan to reduce operating costs.
Framatome finalised the acquisition of the commercial nuclear services of BWX Technologies Inc. (BWXT) in the United States. It is expanding its portfolio of equipment and tools for the inspection and maintenance of nuclear power plants, thereby strengthening its position in the nuclear energy sector.
United Kingdom
In the United Kingdom, sales in the first half of 2020 amounted to €4,595 million, up 3.6% in organic terms.
EBITDA increased to €438 million, i.e. 3.5x organically.
The health crisis had an overall negative impact on EBITDA of -€128 million, due mainly to the drop in consumption (-12%) in the portfolio of industrial and professional customers.
The positive trend in EBITDA can be explained by the increase in nuclear realised prices and the re-instatement of the capacity market. These positive elements were partially impacted by lower nuclear output due to maintenance operations and planned outages.
In a highly competitive environment, the portfolio of residential customers was stable overall and margins were increasing thanks to an improved customer mix.
Finally, the health crisis has slowed down nuclear construction and maintenance projects. As regards HPC, the risk of delays in the commissioning schedule is high. In September 2019, it has been estimated at 15 months for Unit 1 (planned for the end of 2025) and at 9 months for Unit 2. These postponements would lead to an additional cost of approximately £ 0.7bn. The impacts of Covid 19 on the schedule and costs are currently being assessed (including impacts on supplier production conditions and associated delivery times) and increase the risk of postponement of planned commissioning dates. A comprehensive study to assess the need for an updated schedule and costs is currently underway and will be completed in the coming months.
Italy
In Italy, sales at the end June 2020 amounted to €2.909 million, down 28.8% in organic terms compared to the first half of 2019. EBITDA is broadly stable and stood at €380 million.
Overall, the health crisis has affected Italy's EBITDA by an estimated -€47 million.
The contribution from supply activities is down compared to the first half of 2019 due to the impact of the health crisis on gas and electricity volumes, particularly in the industrial customer segment (estimated at
-€40 million).
Results from service activities are down for industrial customers due to the health crisis (estimated at -€7 million).
In the Electricity Activities, EBITDA declined due to lower availability of the CCGT (combined cycle gas) fleet, which was partially offset by the good performance of ancillary services.
In gas activities, EBITDA benefited from better optimisation of medium and long-term gas supply contracts.
Other international
Sales in Other international amounted to €1,244 million at the end of June 2020, down 5.3% in organic terms compared to the first half of 2019. EBITDA was up organically by 31.9% to €208 million.
In Belgium , EBITDA was up 34.0% in organic terms. The health crisis had an unfavourable impact on EBITDA estimated at -€29 million due to the drop in consumption, sales on the power markets under deteriorated price conditions, the decline in service activities and collection risks on trade receivables. The first half of the year benefited from a strong performance in wind farm generation, which rose sharply to 642GWh (+47%) thanks to favourable wind conditions and the development of installed capacity. Net installed wind capacity increased to 485MW (i.e.+10.7% compared to the end of June 2019). Growth was also driven by improved output from nuclear power plants and more favourable price conditions than in 2019.
In Brazil , EBITDA was up 3.1% in organic terms, mainly due to the revaluation in November 2019 of +5% of the Power Purchase Agreement (PPA) price linked to the EDF Norte Fluminense plant. This favourable effect was almost entirely offset by an increase in fuel prices due to the depreciation of the Brazilian Real against the dollar. The effect of the health crisis in Brazil is not material.
Other activities
Sales in Other activities amounted to €1,200 million, down 27.1% in organic terms compared to the first half of 2019. EBITDA declined organically by 70.5% to €135 million.
Overall, the health crisis has affected the EBITDA of the Other activities segment for an estimated -€36 million.
The gas business was affected by a provision for onerous contracts recorded mainly due to the downward revision of medium and long-term spreads between the U.S.A. and Europe.
EDF Trading's EBITDA amounted to €391 million, down 15.3% in organic terms compared to the exceptional first half of 2019. The health crisis affected trading margins amounting to around -€31 million at the end of June mainly due to an increase in provisions for counterparty risk. Despite a context of crisis-related uncertainties, the performance of trading activities remained strong, generating a good result in the first half of the year.
Main events since
the 2020 first quarter press release
Major Events
Participations, partenariats et projets d'investissements
EDF Renouvelables
EDF Energy
APPENDICES
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
(1) Customers are counted since 2018 per delivery site; a customer can have two delivery points: one for electricity and another for gas. .
Disclaimer
This presentation does not constitute an offer to sell securities in the United States or any other jurisdiction.
No reliance should be placed on the accuracy, completeness or correctness of the information or opinions contained in this presentation, and none of EDF representatives shall bear any liability for any loss arising from any use of this presentation or its contents.
The present document may contain forward-looking statements and targets concerning the Group's strategy, financial position or results. EDF considers that these forward-looking statements and targets are based on reasonable assumptions as of the present document publication, which can be however inaccurate and are subject to numerous risks and uncertainties. There is no assurance that expected events will occur and that expected results will actually be achieved. Important factors that could cause actual results, performance or achievements of the Group to differ materially from those contemplated in this document include in particular the successful implementation of EDF strategic, financial and operational initiatives based on its current business model as an integrated operator, changes in the competitive and regulatory framework of the energy markets, as well as risk and uncertainties relating to the Group's activities, its international scope, the climatic environment, the volatility of raw materials prices and currency exchange rates, technological changes, and changes in the economy ; and this year, more particularly the effects of the health crisis and the pace of business recovery in the various countries where the Group is present.
Detailed information regarding these uncertainties and potential risks are available in the Universal Registration Document (URD) of EDF filed with the Autorité des marchés financiers on
13 March 2020 , which is available on the AMF's website at www.amf-france.org and on EDF's website at www.edf.fr, as well as in the 2020 half-year financial report available on EDF's website.
EDF does not undertake nor does it have any obligation to update forward-looking information contained in this presentation to reflect any unexpected events or circumstances arising after the date of this presentation.
Ce communiqué de presse est certifié. Vérifiez son authenticité sur medias.edf.com
( ) After deduction of pumped-storage hydropower volumes, hydropower production stood at 22.7TWh for H1 2020 (17.1TWh at H1 2019).
( [2] ) Sum of personnel expenses and other external expenses. At constant scope, standards, exchange and pensions discount rates, and excluding inflation. Excluding costs of sales from energy services activities, and Framatome's nuclear engineering services and specific projects such as Jaitapur.
( [3] ) Excluding disposal plan and excluding acquisitions.
( [4] ) Signed or completed disposals: impact on Group's economic debt.
( [7] ) Net financial debt is not defined in the accounting standards and is not directly visible in the Group's consolidated balance sheet. It comprises total loans and financial liabilities, less cash and cash equivalents and liquid assets. Liquid assets are financial assets consisting of funds or securities with initial maturity of over three months that are readily convertible into cash and are managed according to a liquidity-oriented policy.
( [8] ) The 2019 published data (except NFD) have been restated for the impact of the change in the scope of the ongoing E&P disposal. The ratio at 30 June 2020 is calculated based on cumulative EBITDA for the second half of 2019 (restated) and the first half of 2020.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( [10] ) See press release of 2 July 2020.
( [11] ) Tariff change of +7.7% excl. tax on 1 June 2019 and +3.0% excl. tax on 1 February 2020 (including half of the tariff catch-up).
( ) Sum of personnel expenses and other external expenses. At comparable scope,standards, exchange rates and pension discount rates. Excluding change in operating expenses service activities.
( ) Regulated activities including Enedis, Électricité de Strasbourg and island activities.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( [15] ) Indexed adjustment of TURPE 5 distribution tariff of +3.04% and the TURPE 5 transport tariff of +2.16% at 1 August 2019.
( [16] ) The difference between nominal and organic growth is due to intra-group transfers.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( ) For the renewable energy generation optimized within a larger portfolio of generation assets, in particular relating to the French hydro fleet after deduction of pumped volumes, sales and EBITDA are estimated, by convention, as the valuation of the output generated at spot market prices (or at purchase obligation tariff) without taking into account hedging effects, and include the valuation of the capacity, if applicable.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
([20]) Group Energy Services include Dalkia; Citelum, CHAM and service activities of EDF Energy, Edison, Luminus and EDF SA. They consist in particular of street lighting, heating networks, decentralised low-carbon generation based on local resources, energy consumption management and electric mobility.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( ) Breakdown of EBITDA across the segments, before inter-segment eliminations.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( [24] ) The 2019 published data have been restated for the impact of the change in the scope of the ongoing E&P disposal.
( [25] ) The difference between nominal and organic growth is due to intra-group transfers.
( ) Breakdown of sales across the segments, before inter-segment eliminations.
( [27] ) Luminus and EDF Belgium.
( [28] ) Net capacity at Luminus perimeter. Gross installed wind capacity amounted to 521MW at the end of June 2020 (+15.8 %)
( [29] ) Breakdown of sales across the segments, before inter-segment eliminations.
( ) A full list of press releases is available from the EDF website: www.edf.fr
( ) La liste exhaustive des communiqués de presse d'EDF Renouvelables est disponible sur le site internet : www.edf-renouvelables.com
( [32] ) The complete list of press releases is available on the website: www.edfenergy.com
( [1] ) Organic change at comparable scope, standards and exchange rates.
( [2] ) Net income excluding non-recurring items is not defined by IFRS, and is not directly visible in the consolidated income statement. It corresponds to the net income excluding non-recurring items and the net change in fair value on energy and commodity derivatives, excluding trading activities and excluding net changes in fair value of debt and equity securities, net of tax.
( [3] ) Completion of the nuclear island commun raft .
( [4] ) ' Development Consent Order'.
( [5] ) In number of delivery sites.
( [6] ) On the basis of the scope and exchange rates at 1 January 2020 and nuclear output hypothesis in France of between 315TWh and 325TWh for 2020 and between 330TWh and 360TWh each year in 2021 and 2022.
( [7] ) Sum of personnel expenses and other external expenses. At constant scope, standards, exchange and pensions discount rates, and excluding inflation. Excluding costs of sales from Group Energy Service Activities, and nuclear engineering services of Framatome and specific projects such as Jaitapur.
( [8] ) Signed or completed disposals: impact on Group's economic debt.
( [9] ) The data published for the 2019 fiscal year (except NFD) have been restated for the impact of the change in the scope of the ongoing E&P disposal.
( [10] ) Estimated figures. By convention, no price effect in the context of the health crisis has been attributed to the Covid-19 crisis.
Attachment
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