Desperate times call for desperate measures. Last week’s high-level meetings in Paris finally admitted EDF needs help. The quick list of what’s in a provisional rescue plan looks like this:
- €1 bn cost savings by 2019
- €3 bn dividends (‘profits’) converted into shares over two years
- €4 bn new shares over one year
- €10 bn so-far-unspecified asset sales by 2020
If all realised, this totals around €18 bn, almost all one-off items.
On diluting the value of existing capital, the investors took a dim view yesterday (25/4) with EDF’s share price falling 11%.
In its statement late Friday the company did not say which assets it plans to sell off. The group has operations in 15 countries in addition to France, the largest being those in UK and Italy. Media reports over the last year suggest the following main disposals:
- France: 50% of transmission grid
- USA: 50% of four nuclear plants
- UK: Part of 80% ownership of eight nuclear plants
- Italy: Some or all of Edison stake
- Poland: Coal capacity and CHP facilities
None of these prospective transactions can be realised quickly. And given the situation and track record across the power utility sector, sums realised may not be as optimistic as so far thought.
What else is EDF up against? Most critical are low wholesale electricity prices and high costs in its home market. The company acknowledges that prices, as elsewhere in continental Europe, are expected to stay low for some years to come.
Against this trend, planned company costs savings, even if further increased, are likely to make little impact, especially alongside investment needs for safety upgrades (post-Fukushima) and proposed plant life-time extensions, the costs of which EDF said was around €55bn last November.
The €18bn gains listed above also compare unfavourably both to the €23bn (£18bn) overnight cost of the Hinkley Point C proposal, albeit spread over ten years and the EDF debt pile of €37bn, which isn’t getting smaller.
Today’s FT Lex column was sceptical of the plan. So am I. This story is far from over. ❧