EDF Profit Beats Estimates as U.K. Reviews Nuclear-Power Project

  • French utility extends depreciation period on nuclear plants
  • U.K. government to review $24 billion Hinkley Point project

Electricite de France SA reported first-half profit that beat analyst expectations as the British government cast doubt on the future of the company’s 18 billion-pound ($24 billion) nuclear-power project in the U.K.

Profit excluding one-time items rose 1.4 percent to 2.97 billion euros ($3.3 billion), the Paris-based company said in a statement Friday, beating the mean 2.22 billion-euro estimate of four analysts surveyed by Bloomberg. EDF extended the depreciation period for some nuclear plants in France to 50 years, boosting earnings by 310 million euros. The utility also started exclusive talks Thursday to sell half of its French power grid RTE to Caisse des Depots and CNP Assurances in a deal valuing the unit at 8.45 billion euros.

“First-half operating metrics are reassuring,” Xavier Caroen, an analyst at Bryan Garnier in Paris, wrote in a research note. “The company appears to be speeding up its transformation plan as shown by the extension to 50 years of about half of company’s nuclear assets, and the sale of half of its stake in grid operator RTE at an attractive valuation.”

While EDF shares jumped the most in five months, the results were overshadowed by the U.K. government’s announcement late Thursday that it planned to review the construction of two nuclear reactors at Hinkley Point in southwest England. That came just hours after the board of state-run EDF gave the go-ahead for the project, which the French government sees as essential to the future of France’s nuclear industry.

Shares Jump

“I have no doubt about the support of the British government,” EDF Chief Executive Officer Jean-Bernard Levy said on a conference call Friday. He referred to a recent statement by Britain’s new chancellor of the exchequer, Philip Hammond, backing Hinkley Point.

EDF shares of EDF rose as much as 11 percent, the most since February, and were trading up 9.4 percent at 12.04 euros at 10:15 a.m. in Paris.

First-half net income fell to 17 percent to 2.08 billion euros from a year earlier as sales dropped 5.7 percent and the company wrote down the value of Polish and U.S. assets, EDF said. Writedowns on assets such as the Rybnik plant in Poland and of EDF’s share in Constellation Energy Nuclear Group in the U.S. trimmed profit by 731 million euros, Chief Financial Officer Xavier Girre said on the conference call.

Reiterating Forecast

Earnings before interest, taxes, depreciation and amortization fell to a better-than-expected 8.94 billion euros in the first half from 9.15 billion euros a year earlier. EDF reiterated its forecast that Ebitda will be in a range of 16.3 billion euros to 16.8 billion euros in 2016. EDF said on July 19 that this forecast includes a cut in its target for French nuclear output and an increase in regulated tariffs that should take place by the end of the third quarter. 

The company, which is also curbing spending, maintained its target to return to positive free cash flow in 2018.

“In a context of increased competition and in an environment marked in recent months by a significant drop in electricity prices on the wholesale market, the group posted good operational results and is able to confirm its financial objectives for 2016,” CEO Levy said.

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