The room to maneuver is limited: Key operating decisions must be taken in conjunction with the French government, EDF’s largest shareholder.
“We are not the decision makers,” Mr. Girre told CFO Journal. “With regards to regulation, the state is.”……..
France’s largest energy producer has also sold assets worth €10 billion ($11.24 billion), and assets worth a further €2 billion to €3 billion are to be divested by 2021. The government recently allowed EDF to give shareholders new shares instead of a cash dividend
A planned restructuring of the company’s assets and a new pricing structure for the French energy market could help Mr. Girre make further improvements, said Claire Mauduit-Le Clercq, analyst at S&P Global Inc.
The plan could allow EDF to separate its nuclear plants—it currently operates 58—from the rest of the business, a move that would enable the company to focus on investments in renewable energy. A large part of the company’s energy production comes from nuclear reactors…….
Analysts say the challenge for EDF will be to fund the turnaround given its hefty debt load. EDF’s net debt—a measure of total loans and financial liabilities less cash and liquid assets—was €33.38 billion at the end of 2018, up from €33.01 billion at the end of 2017.
Further complicating the picture is EDF’s large capital spending program. The company committed in 2014 to spending up to €45 billion by 2025 to extend the lifespan of its nuclear reactors fleet from around 40 to 50 years. The average age of an EDF nuclear power plant currently stands at 33 years.
New plants under construction, for example in Britain’s Hinkley Point, are adding to that cost burden. Total capital expenditures were about €14 billion in 2018. “EDF would not have to sell business after business to fund new investments if this was a viable business model,” AB Bernstein’s Ms. Becker said.
Meanwhile, the company’s net income slumped to €1.17 billion in 2018 from €3.17 billion a year earlier. Fluctuating energy prices, mean “the company lacks visibility into its future earnings,” said Ms. Mauduit-Le Clercq.
“You have a company that faces major investment needs, that has a negative cash flow equation and that has high debt levels—this creates tension in the balance sheet,” she said.
But the company’s financial standing is more vulnerable when other obligations, such as pension liabilities, future obligations to retire certain assets and costs for managing nuclear waste, are factored in. Adjusted net debt was €70 billion at the end of 2018, S&P Global said. https://www.wsj.com/articles/french-nuclear-power-producer-edf-plans-a-turnaround-11560526991
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