The poor results published this morning by EDF for 2022 are not surprising, but the figures are still dizzying. During the past year, the energy company registered one of the worst losses in the history of the CAC 40, amounting to 17,900 million euros when it had closed the year 2021 with a profit of 5,100 million euros.
In recent French history, this is one of the most massive losses behind France Telecom’s $20.7 billion and Vivendi Universal’s $23.3 billion twenty years ago. The electric giant’s debt thus reached a record level of 64.5 billion euros. BFM Business reviews the factors behind this “dark year” for EDF and the energy company’s prospects for 2023 and beyond.
• To what extent has the energy crisis affected EDF?
Energy prices experienced an exceptional increase last year, in particular electricity prices that reached record levels in France during the summer: 612 euros per MWh on average during the week of August 22 for spot prices and 1,200 euros per MWh in August for delivery in the winter of 2022-2023 in the futures markets. EDF has benefited from this as its turnover has increased by 70% to 143.5 billion, thanks in particular to the return of many French customers.
Problem: the year 2022 was marked by particularly high rates of unavailability of the French nuclear park, forcing the group to buy electricity (13.8 TWh) but also gas on the markets, both sold at the price of gold. As a result, France was a net importer of electricity in 2022, which had not happened since 1980, with a deficit of 16.5 TWh in its export balance.
In its electrical report for the year 2022, the administrator of the electrical transmission network mentioned the following figures. The proportion of nuclear reactors in service fell from 73% to 54% between the average for the period 2015-2019 and 2022 with a record low of 21.7 GW on August 28, the date on which two thirds of the park was immobilized.
Several reasons explain this unavailability of a large part of the nuclear reactors: ten-year visits, maintenance work that may have been delayed, but also the phenomenon of stress corrosion cracking (SCC) identified in various infrastructures. Still, nuclear production fell from 361 TWh to 279 TWh between 2021 and 2022, which is its lowest level since 1988. Over the past 20 years, annual nuclear production has averaged more than 400 TWh.
To make matters worse for EDF’s financial situation, the state, which is the majority of the group and will soon be the only shareholder, has forced it to sell more electricity at low prices (42 euros per MWh) to its competing alternative providers as part of the Arenh System (regulated access to historical nuclear electricity). A measure that contributed to the finances of the energy company at a cost of 8.34 billion euros, which led Luc Rémont to deplore a “breathless” system in the autumn.
• How does the state react to these results?
The Government, through the Ministries of Economy and Energy Transition, reacted this morning to the results presented by EDF. “Bruno Le Maire and Agnès Pannier-Runacher take note of the deterioration of EDF’s financial situation, a consequence of the weak production in 2022,” the two ministers indicated in a press release.
Bruno Le Maire and Agnès Pannier-Runacher gave several directions to follow, both in the short and long term. In the immediate future, the main thing is “to restore all of EDF’s electricity production as soon as possible.” One in five reactors is still closed. Although the State has just launched a takeover bid to facilitate the construction of the six new reactors requested by the President of the Republic Emmanuel Macron, the two members of the government also want the new EPR project to be ready now.
Here too, the challenge is considerable as the mandatory public debate on the construction of these new next-generation reactors has recently come to an end, considering that the political decisions were already made anyway. In addition to the adhesion of the French, EDF will have to find financing – the cost of the six EPR2 is estimated at 51,700 million – and mobilize an entire sector that will have to train and hire thousands of engineers and technicians. The state is wondering how to finance the new nuclear program, and keeping the A-books could be part of the solution, as confirmed by Eric Lombard, executive director of the Caisse des Dépôts at BFM Business.
Regarding the relations between the State and the energy company, the renationalization of 100% of EDF announced in 2022, for 9.7 billion euros, is frustrated by the hostility of the employee shareholders who challenge the arrogant methods of the government and a price ransom of 12 euros that they consider too low for the actions. Already the main shareholder with 84%, the State wants to free EDF from the stock market to relaunch nuclear energy more easily. The operation was partially successful and the State has owned almost 96% of the capital since February 8. But the closure remains suspended due to a decision by the Paris Court of Appeal, scheduled no later than May 2.
• Will EDF be able to comply with its nuclear investment plan?
Despite the magnitude of the group’s financial crisis, Luc Rémont wanted to reassure by stating that EDF could support its level of debt even if the group intends to stabilize and reduce it. He also confirmed “the nuclear production range of 300 to 330 terawatt hours (by 2023), which represents a gradual exit from the stress corrosion crisis.”
On a further horizon, the director general assured that he would do everything possible to meet the 2035 date for the start-up of the first new generation nuclear reactor.
As a reminder, Emmanuel Macron has set himself the goal of building six new EPR nuclear reactors, in existing power plants, the first pairs are planned for Penly (Seine-Maritime) and Gravelines (North). The Minister of Energy Transition, Agnès Pannier-Runacher, recently brought forward the date of 2027 – “more like the end of 2027” – for “the first concrete pour” and “2035-2037” for commissioning. But nuclear schedules, as well as budgets, are historically out of date. Commissioning of the Flamanville EPR, under construction since 2007, is now scheduled, for example, for mid-2024, 12 years behind schedule. Her bill should cost 13.2 billion euros, four times the initial budget of 3.3 billion.
“We are in the perspective of a very significant recovery of flows in 2023 and therefore this is what will allow us both to finance the essential investments at this time of energy transition and to cover the financing needs of the group”, adds Xavier Girre. Friday morning. EDF’s chief financial officer said the second phase of the large fairing investment program in the French nuclear fleet amounted to 33 billion euros over the period 2022-2028.
Among the 56 French reactors, the oldest have been in operation since the late 1970s. EDF must quickly prove that their useful life can be extended beyond 50 years. Some components such as the tank, the most sensitive element of the reactor, are not replaceable. Others are difficult, like the molded elbows attached to the tank. Therefore, the Nuclear Safety Authority (ASN) wishes “that the hypothesis of continuous operation of the current reactors up to 60 years and more be studied and justified in advance by EDF by the end of 2024”.
Source: BFM TV
