Nuclear power helps EDF to lower crisis impact

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Les Échos 1/12/14

VERONIQUE LE BILLON DEPUTY HEAD OF DIVISION – 01/12

Nuclear share in France energy mix changes the sector’s balances. The public power operator intends to consolidate its position in Europe.

Although EDF’s European main competitors expand their asset depreciations and change their strategies on a wide scale, France power operator stands out positively. Last year, even if the power operator recorded € 286 million in asset depreciations for the “Benelux” area (Belgium, Netherlands and Luxembourg) and € 234 million on its British power stations the year before, these amounts are minor and at the moment, France has not been affected by these depreciations.

Although the company is implementing its yearly “impairment tests” to compare its production asset values with market prices before accounts closing, its position of quasi-monopoly, combined with regulated tariffs and the nuclear share in its energy mix make the company free from the problems facing its competitors. The nuclear power generation supplies the grid in priority when demand increases, after the renewable production (such as wind, solar or hydraulic production), as nuclear power is more competitive than coal or gas. EDF considers that, even if its thermal power stations (such as gasoil, coal and gas) are not profitable due to a low production, they constitute a share of an integrated park.

Hard times

In fact, the thermal park of the company in France hardly represents 15% of its total installed capacities. Thus its main target consists in optimizing its operating costs (featuring a six-month stop for its gasoil stations this summer) without mothballing any infrastructure, or recording account depreciations. Nonetheless, EDF has often criticized the bearish impact of the German renewables policy on power wholesale market price, which still impacts its profitability. The difficult situation faced by European energy majors is rather an opportunity for EDF to asset purchases. If he had been re-appointed at the head of the group, Henri Proglio, EDF’s CEO, intended to launch a “structuring” wave of acquisitions in Europe during the next eighteen months, to take a part in the market consolidation. Thus, EDF has expressed its interest for E.ON assets in Italy (read “les Échos”, November, 25^th).

But Jean-Bernard Lévy’s appointment at EDF’s top changes the deal. “EDF has important positions in Europe – such as in Great-Britain, Italy, Belgium and Poland- which need to be consolidated”, he said to members of Parliament last week. Then he added that he intended “to draft a doctrine”, which is not yet “completed”.