Bloomberg News

EDF May Double Spending on Nuclear Reactors in France

July 29, 2011

(Adds shares in third paragraph and analyst in fourth.)

July 29 (Bloomberg) -- Electricite de France SA, Europe’s biggest power generator, reported a 6 percent increase in first- half profit and said annual spending on French nuclear reactor maintenance and upgrades could more than double.

Earnings before interest, taxes, depreciation and amortization rose to 8.62 billion euros ($12.4 billion) from 8.14 billion euros a year earlier, EDF said today in a statement. That was in line with the 8.58 billion-euro median estimate of 10 analysts surveyed by Bloomberg.

EDF has been struggling to raise atomic output in France, where the former monopoly operates 58 reactors and is building an EPR model at Flamanville in Normandy. After the meltdown at the Fukushima reactor in Japan, the utility faces increased spending on safety in addition to technical upgrades needed to prolong the lives of aging plants.

EDF fell as much as 2.6 percent and traded at 26.465 euros as of 3 p.m. in Paris. The shares have dropped about 14 percent since the start of the year.

“There are worries that EDF will raise investment by a lot with little return,” Per Lekander, an analyst at UBS AG in Paris, said by telephone. “It was known that EDF would have to spend a lot but the outlook given today is much higher.”

Decade Low

The French government ordered Chief Executive Officer Henri Proglio to make higher nuclear production a priority after output sank to a decade-low in 2009. EDF said today that spending on nuclear plants in France will rise to 3.4 billion to 3.6 billion euros in 2015, compared with 1.7 billion euros last year.

“Our cost estimates are for extending the lives of our reactors and their maintenance, we won’t break out how much will be linked to post-Fukushima safety,” Proglio said at a results presentation.

The Paris-basis utility reiterated 2011 financial targets and raised its outlook for domestic nuclear output. In new goals through 2015, it sees annual average ebitda growth of 4 percent to 6 percent, a 5 percent to 10 percent increase in recurring net income and cost savings of 2.5 billion euros. Total investment could rise to 15 billion euros that year.

“The further we go in the future, the more replacement parts will be needed,” Chief Financial Officer Thomas Piquemal said. Investment will be 11 billion euros this year.

Stress Tests

Fatal accidents and post-Fukushima stress tests have raised the cost of EDF’s new reactor in Normandy to around 6 billion euros and delayed the start of commercial operations to 2016, the company said last week.

EDF raised its target for 2011 nuclear output to 411 to 418 terawatt-hours from a previous estimate of 408 to 415 terawatt- hours. EDF kept its target for reactor availability of 78.5 percent this year, the same as in 2010 and higher than the 78 percent in 2008. “There is no reason” to change a longer-term target of reaching 85 percent, Piquemal said.

EDF will have prolonged shutdowns of nine reactors this year due to 10-year safety inspections compared with five last year and six in 2012, he said. The higher number in 2011 means EDF will remain “prudent” about full-year French output.

First-half output reached a record, Proglio said earlier this week after wholly owned grid operator RTE reported a 7.7 percent rise over the first six months of the year against a 30 percent drop in hydroelectric production amid dry weather.

Lower Debt

The utility isn’t optimistic about a rise in hydroelectric output in the second half despite rainy weather in France in July, according to Piquemal. “The threat of drought has diminished, but what counts is the filling of reservoirs in the winter months.”

EDF’s debt fell to 29.2 billion euros at the end of June from 34.4 billion euros at the end of December, according to today’s statement.

Net income climbed to 2.55 billion euros from a restated 1.66 billion euros a year earlier.

--Editors: Stephen Cunningham, John Viljoen.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net;

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.


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