EDF warns of fallout from France's nuclear reform limbo

By Benjamin Mallet

PARIS (Reuters) - State-controlled French power group EDF can manage without fresh capital from the government until the end of 2022, it said on Thursday, but warned that delays in reform of the country's nuclear sector would hobble its finances.

The utility, which is nearly 84% owned by the government, is awaiting an ambitious nuclear power shake-up and restructuring outlined by President Emmanuel Macron, but the process has become bogged down in negotiations with Brussels.

A key plank of the overhaul involves higher price guarantees on nuclear energy EDF sells to third-party providers, helping the debt-laden utility to cover production costs.

But the plan, which would entail separating the nuclear business from other activities, has been opposed by unions and held up by EU questions over antitrust and state aid issues.

The company hopes the reforms will be completed by 2023, EDF executives said as it reported a drop in 2020 profit after the COVID-19 pandemic sapped electricity demand.

"We are happy to say that we are sort of secured, or safe, until the end of 2022 and that will give us time to prepare for what we will be able to design together with the French government," Chairman and Chief Executive Jean-Bernard Levy said an analysts call.

The French government has recapitalised EDF in the past and has for now agreed to take dividend payouts in shares to alleviate pressure on the company's finances.

SLOW PROGRESS

Levy said talks between Paris and Brussels were progressing too slowly, however, and negotiators remain far apart on major issues as the window for passing the necessary legislation shortens ahead of a presidential election next year.

EDF has ramped up the rhetoric in recent weeks, warning that the reforms are essential to prevent the group from falling behind rivals, such as Total, in renewable energy and becoming a second-tier power player.

On Thursday the company raised its target for installed renewable capacity to 60 gigawatts (GW) by 2030 from 50 GW.

EDF shares were down 1% at 1046 GMT.

Despite the impact of the COVID-19 crisis on nuclear output, EDF's 2020 core profit came in at a higher than expected 16.2 billion euros ($19.51 billion), down 2.7% from a year earlier when stripping out currency fluctuations and disposals or acquisitions. The company said it was targeting EBITDA of more than 17 billion euros in 2021.

Full-year revenue was down 3.4% at 69 billion euros, slightly below forecasts while net profit plunged 87.4% to 650 million euros, hit by charges including tax litigation and some costs linked to its Flamanville 3 plant.

The group is about a third of the way through the 500 million euros of cost cuts targeted by the end of this year to contend with the coronavirus crisis and made half a billion euros of divestments out of a 3 billion euro target.

EDF maintained its outlook for French nuclear output of between 330 and 360 terawatt hours (TWh) this year after production fell 11.6% to 335.4 TWh in 2020.

($1 = 0.8304 euros)

(Reporting by Benjamin Mallet; Additional reporting by Sarah White; Editing by Jason Neely and David Goodman)