Edf: 2023 Annual Results: Substantially higher nuclear power output in France - Good overall operational performance - New commercial policy - Net financial debt reduced - Trajectory 1.5°C validated by Moody's

2023 ANNUAL RESULTS

Substantially higher nuclear power output in France
Good overall operational performance
New commercial policy
Net financial debt reduced
Trajectory 1.5°C validated by Moody's

Key financial results:

• EBITDA
  
  

The gradual recovery of nuclear power generation in France, the high-price environment in Europe (entailing a record ARENH scheme cropping price), and the absence of regulatory measures of the kind introduced in 2022 were the main explanations for the exceptional (almost €45 billion) improvement in EBITDA to €39.9 million in 2023. The other businesses' operational performances also contributed. The United Kingdom registered a good performance, particularly in sales. In Italy, most business segments contributed to this rise in EBITDA, and Dalkia's sales performance was also very satisfactory.

• Net income
  
  

The financial result for 2023 was an expense of €3.3 billion, a slight improvement of €0.2 billion from 2022 explained by:

• a good performance by the dedicated asset portfolio, which achieved a return of 10.2% (vs -8.5% in 2022) thanks to favourable developments on the financial markets, particularly the equity markets in 2023 leading to a €6.5 billion improvement in other financial income and expenses (with a limited cash impact);
• a €4.2 billion increase in the cost of unwinding the discount, principally owing to stability in the real discount rate applied for nuclear provisions in 2023 after the positive impact of a 50bp rate increase in 2022 (with no cash impact);
• a €2.1 billion increase in the cost of gross financial debt, primarily reflecting a significant increase in interest rates (with a cash effect of €1.8 billion).
  
  

The financial result excluding non-recurring items, particularly the change in fair value of the dedicated asset portfolio, was -€5.6 billion, a decrease of €5.4 billion.

Net income excluding non-recurring items stood at €18.5 billion, up by €31.1 billion in line with the significant growth in EBITDA after the corporate income tax expense (an income tax credit was booked in 2022).

The Group's net income totalled €10.0 billion, up by nearly €28 billion. Apart from the large increase in net income excluding non-recurring items, the principal items after tax contributing to this change are:

• the €4.0 billion change in the fair value of financial instruments;
• €7.9 billion of impairment on the Hinkley Point C project and EDF Energy's goodwill in 2023, in view of the new schedule and additional costs announced in January 2024.

• Cash flow
  
  

Cash flow for 2023 amounted to €9.3 billion, versus -€24.6 million in 2022. This is explained by cash EBITDA of €43.9 billion resulting from a good operating performance and a very high price effect. It also benefited from the closing in 2023 of trading positions taken in 2022, with an effect of €5.3 billion.
Working capital requirement increased by €7.8 billion, comprising:

• €5.1 billion for optimisation of trading, mainly reflecting the repayment of margin calls as positions were closed in 2023.
• €3.9 billion due to the 2023 CSPE receivable generated by France's tariff shield, which was offset by lower revenues from purchase obligations in a context of declining prices, compensation payments by the French State for 2023 charges, and the regularisation of excess compensation of previous years.

This cash flow funded net investments of €19.1 billion, €2.7 billion more than in 2022 due notably to the Hinkley Point C project, extensive maintenance work on the nuclear fleet, and network growth.

• Net financial debt
  
  

Net financial debt ⁽¹⁾ totalled €54.4 billion at 31 December 2023, a decrease of €10.1 billion compared to end-2022. As well as the positive cash flow, the €2.4 billion conversion of OCEANE bonds reinforced EDF's equity.
The bond issues of 2023, totalling around €8 billion, the lower level of short-term debt, and early repayments of bank loans lengthened the maturity of the Group's financial debt to 11 years at 31 December 2023 (versus 9.4 years at 31 December 2022).
EDF received the 2024 International Financing Review (IFR) “Corporate Issuer of the Year” award for its issues in 2023.

                                                                                                                                           Financial results by segment:

Segment sales are presented before elimination of inter-segment operations.

• France - Generation and supply 
  
  

The considerable increase in EBITDA was driven by the gradual recovery by nuclear generation, with a favourable effect of €5.7 billion.
In 2022, the exceptional regulatory measures introduced by the French government to limit rises in sales prices to consumers had an adverse effect on EBITDA estimated at -€8.2 billion.
The lower nuclear output in 2022 had led to purchases of large volumes at very high market prices, but this effect was much smaller in 2023, generating a positive impact of €7.3 billion.
Also, the rise in prices had an impact of €12.1 billion for final consumers and €12.5 billion covered by the tariff shield. This effect is largely explained by the average forward market price for the past 2 years, which was €218/MWh in 2023 compared to €71/MWh in 2022, and an ARENH cropping price of €410/MWh in 2023, versus €257/MWh in 2022.

• France - Regulated activities ⁽²⁾
  
  

The decrease in EBITDA is principally explained by a negative price effect estimated at €1.3 billion, caused by purchases of network losses made at very high market prices (this additional cost will be compensated by future tariff increases). However, changes in the TURPE network access tariff had a favourable effect estimated at €0.7 billion ⁽³⁾.

Also, in 2022 a €1.7 billion payment was received from RTE ⁽⁴⁾, corresponding to a share of interconnection fees, and there was no equivalent receipt in 2023.

The 8.2TWh decline in volumes distributed (excluding the weather effect) had a limited negative impact on EBITDA estimated at €0.1 billion.

• EDF Renewables - Renewable Energies
  
  

Group renewables excluding hydropower in France

Contribution by EDF Renewables

The increase in EBITDA for Group Renewables is attributable to a 14% increase in wind and solar power output thanks to new capacities installed that brought total net capacity to 15.1GW at end-2023. In Italy and Belgium, hydropower output also rose substantially in a favourable price environment.

At EDF Renewables, EBITDA for generation increased due to 10.9% higher volume output following the commissioning of new plants in 2022 and 2023, despite less favourable wind conditions, particularly in the United Kingdom and the United States. The downturn in prices only affected the plants that are exposed to market prices.

Investments by Group Renewables were higher than in 2022, particularly due to development of large-scale solar plants in the United States (including Fox Squirrel - 753MW gross and Desert Quartzite - 527MW gross), in the United Kingdom and wind farms in Brazil (Eólico Serra do Seridó and Serra das Almas).

• Dalkia - Energy Services
  
  

Group Energy Services ⁽⁵⁾

Contribution by Dalkia

The service activities of Dalkia, Sowee and Izivia in France and the Edison Next activity in Italy all contributed to the increase in EBITDA for the Group Energy Services.

At Dalkia, the rise in EBITDA is attributable to the business performance, particularly in energy efficiency services and decarbonisation in France. Also, Dalkia's co-generation plants were in operation over the whole first quarter in 2023 (in 2022, Dalkia was affected by early shutdowns due to a shortened winter tariff period).

The rise in investments mainly concerned Dalkia and Edison Next.

• Framatome
  
  

The change in EBITDA is explained by an increase in Installed Base services provided on behalf of EDF, and the ramping up of new nuclear projects in France and the United Kingdom. The contribution to Group EBITDA was lower, essentially in North America (financial difficulties with performance of a safety Instrumentation & Control renovation contract, and a temporary downturn in production by the nuclear fuel assembly plant).

Order intake amounted to approximately €4.8 billion at end-2023, higher than in 2022. The rise is mainly attributable to the Installed Base business in North America.

Framatome and Naval Group completed the acquisition of Jeumont Electric in late 2023. This operation consolidates Framatome's activities in the nuclear energy sector, by integrating a supplier specialising in production and maintenance of motors and equipment for the energy sector.

• United Kingdom
  
  

The increase in EBITDA was driven, in particular, by sales performance in the medium and large business segments, which helped to strengthen margins and market share. Allowances in the domestic default tariff cap led to a recovery of margins in the residential market, allowing suppliers to recuperate some of the costs incurred at the height of the energy crisis.

Operational performance was strong for the generating business, where the higher realised nuclear prices offset lower power generation of 37.3TWh, down by 6.3TWh, following the shutdown of Hinkley Point B (-4.1TWh) in August 2022 and a more intense maintenance programme than in 2022.

• Italy 
  
  

In Italy, the increase in EBITDA in the electricity generation business was driven by better renewable energy output, especially in hydropower generation thanks to better hydrological conditions. However, this trend was mitigated by an unfavourable price effect in thermal generation.

In the sales activities, margins recovered across all customer segments.

Finally, the gas business benefited from effective optimisation of the supply contract portfolio, despite the strong negative impact of non-delivery of agreed LNG supplies from the United States.

Wind and solar power capacities totalled 650MW net ⁽⁶⁾ at end-2023.

• Other international
  
  

The rise in EBITDA in Belgium ⁽⁷⁾ is explained by better nuclear power output (+6%) compared to 2022, a year when results were affected by energy purchases at high prices and outage at the Chooz power plant. Generation was also up for hydropower (+54%) and wind power (+29%) in a high-price environment.

Wind power capacities totalled 633MW net ⁽⁸⁾ at end-2023.

In Brazil, EBITDA was down slightly due to the downturn in system services and an unfavourable spot price effect, despite the +5% adjustment to the Power Purchase Agreement attached to EDF's Norte Fluminense plant in November 2022.

• Other activities
  
  

Lower prices and lower levels of business at the Dunkirk terminal, after an exceptional year in 2022 with very high prices on the wholesale markets, explain the sharp decrease in EBITDA for the gas activities.

In a context of market and counterparty risks decline, EDF Trading achieved excellent performances, well above the pre-energy crisis levels of 2021. These performances were mainly achieved through good diversification, although the contribution to EBITDA was down from 2022 due to falling prices and lower volatility on the wholesale markets in 2023.

Extract from the consolidated financial statements

Consolidated income statement

(1)   Other external expenses are reported net of capitalised production.

Consolidated balance sheet

Consolidated cash flow statement

(1)   In 2023, these transactions in the United Kingdom notably include capital injections of €958 million by CGN into the Hinkley Point C project (€1,351 million in 2022), and a €485 million capital injection by the UK government into the Sizewell C project (€209 million in 2022).
(2)   Including €(2,789) for redemption of hybrid notes in 2023 (€(267) million in 2022).

Main press releasessince announcement of the HY1 2023 results

Governance

• Appointment of Thierry Le Mouroux to the EDF Group's Executive Committee (PR of 17/10/2023)
  
  

CSR

• COP 28: EDF signs several cooperation agreements to decarbonise electricity generation (PR of 08/12/2023)
• EDF Group announces new objectives to reduce its CO2 emissions and reach “Net Zero Emissions” (PR of 28/11/2023)
• Obs'COP 2023: Climate Change: World Opinion Faces up to Contradictions (PR of 27/11/2023)
• EDF launches Oklima, a subsidiary dedicated to carbon offset solutions (PR of 12/09/2023)

Nuclear

• Hinkley Point C Update (PR of 23/01/2024)
• Investment boost to maintain UK nuclear output at current levels until at least 2026 (PR of 09/01/2024)
• Framatome and Naval Group finalise the acquisition of Jeumont Electric (PR of 09/01/2024)
• Estimated nuclear generation in France for 2026 (PR of 21/12/2023)
• NUWARD and EDF are proud to start the second phase of the Joint Early Review of the NUWARD SMR design with an extended group of European nuclear safety authorities (PR of 19/12/2023)
• Big Carl's spectacular dome lift caps the year at Hinkley Point C (PR of 15/12/2023)
• EDF submits a set of technical and commercial proposal for a new nuclear programme with EPR technology in Slovenia during the World Nuclear Exhibition 2023 and further signs key agreements with international partners (PR of 30/11/2023)
• EDF chooses Veolia's pioneering technology to strengthen its emergency water treatment resources (PR of 29/11/2023)
• EDF reaffirms the role of new nuclear development in its commitment to support the global energy transition by signing several strategic cooperation agreements during the World Nuclear Exhibition 2023 (PR of 28/11/2023)
• EDF submits to the Czech operator ČEZ and its project company Elektrárna Dukovany II its Updated Initial Bid for one EPR1200 reactor to be constructed at the Dukovany site and up to four units in the Czech Republic (PR of 31/10/2023)
• EDF Group creates new UK engineering subsidiary (PR of 21/09/2023)
  
  

Renewables

• Corporate PPA: EDF Renewables reaches 600 MW of long-term contracts in France (PR of 18/12/2023)
• The consortium of EDF - TotalEnergies - Sumitomo Corporation entered into joint development agreement with the government of Mozambique for the 1,500MW Mphanda Nkuwa hydropower project (PR of 13/12/2023)
• After the conversion of the Port Est power plant to liquid biomass, EDF's power generating fleet in Reunion Island reaches 100% of renewable energy (PR of 04/12/2023)
• Masdar, EDF Renewables and Nesma Renewable Energy win tender for 1.1GW solar project in Saudi Arabia (PR of 28/11/2023)
• Provence Grand Large's first floating offshore wind turbine has been installed at sea (PR of 19/09/2023)
  
  

Customers

• EDF invests in Spotr to accelerate housing's decarbonisation (PR of 23/01/2023)
• La Poste Group and EDF Group join forces to accelerate energy transition of La Poste's real estate assets (PR of 12/12/2023)
• Launch by the French government of a public consultation on a proposed system to protect electricity consumers from 1 January 2026 (PR of 24/11/2023)
• IZI by EDF launches its range of connected charging points for condominiums (PR of 09/11/2023)
• EDF launches “Zen Flex” and “Défis Utiles” (Useful Challenges) to help customers reduce their energy consumption (PR of 12/10/2023)   
  
  

Enedis

• Storm Ciarán: Enedis activates its Electricity Rapid Response Force (Force d'Intervention Rapide d'Electricité) (PR of 02/11/2023)
• Two months after becoming an “entreprise à mission”, Enedis sets up its Mission Committee (PR of 13/09/2023)

Financing

• EDF announces the Redemption of Outstanding Perpetual Subordinated Notes (PR of 14/12/2023)
• EDF announces the success of its first senior green bond issue dedicated to the financing of the existing nuclear fleet, for a nominal amount of 1 billion euros (PR of 28/11/2023)
• EDF announces the first partial repayment of bank financing concluded in 2022 2022 (PR of 19/10/2023)   
• EDF announces the success of its senior multi-tranche green bond issue for a nominal amount of 325 million Swiss Francs (PR of 21/08/2023)   

This press release is certified. Check its authenticity on medias.edf.com.

The EDF Group is a key player in the energy transition, as an integrated energy operator engaged in all aspects of the energy business: power generation, distribution, trading, energy sales and energy services. The Group is a world leader in low-carbon energy, with a low carbon output of 434TWh, a diverse generation mix based mainly on nuclear and renewable energy (including hydropower). It is also investing in new technologies to support the energy transition. EDF's raison d'être is to build a net zero energy future with electricity and innovative solutions and services, to help save the planet and drive well-being and economic development. The Group supplies energy and services to approximately 40.9 million customers ⁽¹⁾ and generated consolidated sales of €139.7 billion in 2023.

(1) Customers are counted per delivery site. A customer may have two delivery points.

This presentation is for information purposes only and does not constitute an offer or solicitation to sell or buy instruments, any part of the company or assets described, in the US or any other country. This document contains forward-looking statements or information. While EDF believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions at the time they are made, these assumptions are intrinsically uncertain, with inherent risks and uncertainties that are beyond the control of EDF. As a result, EDF cannot guarantee that these assumptions will materialise. Future events and actual financial and other results may differ materially from the assumptions underlying these forward-looking statements, including, but not limited to, differences in the potential timing and completion of the transactions they describe. Risks and uncertainties (notably linked to the economic, financial, competition, regulatory and climate situation) may include changes in economic and business trends, regulations, and factors described or identified in the publicly-available documents filed by EDF with the French financial markets authority (AMF), including those presented in Section 2.2 “Risks to which the Group is exposed” of the EDF Universal Registration Document (URD) filed with the AMF on 21 March 2023 (under number D.23-0122), which may be consulted on the AMF website at www.amf-france.org or the EDF website at www.edf.fr.
Neither EDF nor any EDF affiliate is bound by a commitment or obligation to update the forward-looking information contained in this document to reflect any events or circumstances arising after the date of this presentation.

(1) Net financial debt is not defined in the accounting standards and is not directly visible in the Group's consolidated balance sheet. It comprises total loans and financial liabilities, less cash and cash equivalents and liquid assets. Liquid assets are financial assets consisting of funds or securities with initial maturity of over three months that are readily convertible into cash and are managed according to a liquidity-oriented policy.
(2) Including Enedis, Électricité de Strasbourg and the French island activities.
(3) Indexed adjustment to the TURPE 6 distribution tariff: +2.26% at 1 August 2022 and +6.51% at 1 August 2023.
(4) In application of decision 2022-296 of 17 November 2022 published by the French energy regulator Commission de Régulation de l'Énergie (CRE). The substantial increase in wholesale prices resulted in an increase in interconnection income for RTE, and the CRE decided that this “windfall” should be shared with the users of the electricity transmission users earlier than under normal procedures.
(5) Group Energy Services comprises Dalkia, IZI Confort, IZI Solutions, Sowee, Izivia, and the service activities of EDF Energy, Edison, Luminus and EDF SA. The services consist in particular of heating networks, decentralised low-carbon generation using local resources, street lighting, energy consumption management and electric mobility.
(6) For Edison's scope.
(7) Luminus and EDF Belgium.  
(8) For Luminus' scope

(1) 40.9 M customers counted by point of delivery in France, the United Kingdom, Italy, and Belgium. One customer may have two points of delivery.
(2) Enerdata named EDF the world's largest producer of low-carbon electricity in 2022.
(3) Estimated nuclear generation by the plants currently in operation.
(4) Excluding the island activities, before deduction of pumped-storage volumes. After deduction of pumped-storage volumes, total hydropower output was 33.0TWh in 2023 (25.0TWh in 2022).
(5) The risks of deviations in components, equipment or equipment parts delivered by EDF's service providers and suppliers could, after analysis and provided the deviations are confirmed, lead to justification or correction of deviations and the possibility of a delayed start-up date.
(6) See the press release of 23 January 2024. Previously, production by Unit 1 was expected to start in June 2027 and the completion cost was £25-26 bn₂₀₁₅ (see PR of 19 May 2022).
(7) See note 10.8 to the 2023 consolidated financial statements.
(8) See the Net Zero Assessment report
(9) Based on scope and exchange rates as at 1 January 2024 and French nuclear output of 315-345TWh in 2024 and 335-365TWh in 2025 and 2026 by the plants currently in operation.
(10) Applying constant S&P ratio methodology.

Attachment

• PR FY 2023 V16.02.2024