April 2002
Electricité de France unveils poor 2001 result
FT.com, March 31, 2002
By Victor Mallet, in Paris[Posted 02/04/2002]
Electricité de France, the state-owned French energy group criticised for protecting its home market while investing in liberalised markets abroad, has unveiled 2001 results that show the financial dangers of its foreign expansion strategy.
EDF's net profit declined 26 per cent to €841m from €1.14bn in 2000, in spite of the company clawing back €1.1bn in provisions because of the successful renegotiation of its nuclear fuel reprocessing contract with Cogema, the French nuclear group.
Much of the blame for the fall in net profit lay in Latin America, where EDF's operations in Argentina and Brazil lost €545m after foreign exchange losses of €702m.
A further negative contribution of €781m from currency translation adjustments brought the total impact on EDF's equity to €1.33bn. "That's the bill EDF has paid for the Latin American crisis," said Jacques Chauvin, chief financial officer.
In addition, EDF took a €170m hit to its bottom line from EnBW, the German group in which it has a 34.5 per cent stake. Although EnBW was profitable under German accounting conventions, the application of French accounting rules and various write-offs by EDF weighed on the French group's 2001 profits.
"It's the first year that the foreign subsidiaries haven't made a positive contribution," said Mr Chauvin, "and it's largely because of Latin America."
EDF, however, is determined to compensate for the Brussels-enforced opening of the French energy market by increasing its international presence. Last year, EDF's like-for-like turnover rose 8.2 per cent, partly because of the new contribution of EDF Trading, but the overall figure was up 18.3 per cent to €40.72bn as a result of the group's foreign acquisitions.
The company says it on target to have 50 per cent of revenues coming from operations other than French electricity by 2005, with the proportion reaching 35 per cent last year.
EDF has a three-year programme to invest €19bn on international investment, of which €8bn has already been allocated. "Our priority is Europe," said François Roussely, EDF chairman.
He rejected suggestions that the company was prepared to overpay for its purchases, saying that it had been buying at "market prices" of 7-8 times ebitda (earnings before interest, tax, depreciation and amortisation), while others had paid 11 or 12 times ebitda.
Mr Roussely declined to be drawn on plans for the partial privatisation of EDF, widely regarded as inevitable after this year's French presidential and legislative elections. "I am concerned with the opening of the markets, not with the opening of our capital," he said.
EDF's accounts were flattered by a €652m exceptional gain, mainly from property sales, compared with a gain of just €71m the previous year. But the company said it had suffered from being obliged to buy electricity from renewable energy sources, and from a tax charge that rose to €577m from €28m.
Net debt rose to €22.2bn from €17.6bn, mostly as a result of EDF's recent buying spree.
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