Electricite de France SA, Europe’s biggest generator, has obtained through arbitration lower prices for natural gas in a contract between Italian unit Edison SpA and Algeria’s Sonatrach.
The decision, which will allow Edison to recover past losses, came on April 24 as part of a process started in 2011, Thomas Piquemal, EDF’s chief financial officer, said on a conference call on first-quarter sales. It will add 300 million euros ($395 million) to Edison’s 2013 earnings before interest, taxes, depreciation and amortization.
“The Italian market remains very difficult,” Piquemal said. “The negative margin that we incur in our gas operations in Italy is extremely significant.”
The cost of gas under long-term contracts is higher than on the spot market, which has prompted EDF and GDF Suez SA to renegotiate the terms of agreements. In France, the government has put pressure on GDF Suez to rely more on spot market supply in order to lower utility bills for consumers.
The decision on Sonatrach follows renegotiation of terms by EDF on contracts with OAO Gazprom in 2011 and with Libya and Qatar last year, Piquemal said today.
“Looking forward there are still prices to be renegotiated in all those contracts,” he said. Edison’s Ebitda will be 500 million euros this year without further renegotiations compared with what EDF considers to be a normal level of 1.1 billion euros.
Edison could recover the 600-million-euro difference from new contracts with Libya, Qatar and Russia, he said. An agreement could come in 2013 or “most probably in 2014” if arbitration occurs.
EDF reported a 12 percent gain in first-quarter sales after taking over Edison and said profit will rise in the second half on cost savings and improved atomic output.
EDF confirmed 2013 financial and nuclear output targets. Full-year targets don’t include Edison, Piquemal has said.