EDF Posts Historical Losses in 2022; Shares Driven by Risk Arbitrage

EDF EDF posted historical losses in 2022 chiefly because of massive nuclear outages. We maintain our fair value estimate of EUR 12 per share, aligned with the takeover bid price from the French government. The latter now owns 95.82% of EDF’s existing shares. The threshold of 90% of shares needed to launch a mandatory squeeze-out has been met. However, some minority shareholder associations have lodged a claim to the Paris Court of Appeal seeking to nullify the clearance of the tender offer by the French stock exchange watchdog, the AMF. The French state will not implement the squeeze-out procedure pending the court’s decision, due by the end of the first half.

EBITDA in 2022 was negative EUR 5 billion, down from EUR 18 billion in 2021. The key negative driver was massive nuclear outages because of corrosion issues leading to an 82 terawatt-hours drop in nuclear production. The firm had to cover the resulting short position by buying electricity on the wholesale market while power prices were skyrocketing on the back of these outages and the energy crisis. This entailed EUR 29 billion losses, slightly better than the guidance of EUR 32 billion thanks to the drop in power prices at the end of 2022. Regulatory measures forcing EDF to increase the electricity volumes it sells at a low price to its competitors in France entailed EUR 8.2 billion losses, in line with the guidance. These severe headwinds were partially offset by a EUR 8.7 billion positive price effect in France, higher nuclear output in the U.K., and high profits from the trading business, in line with peers.

EDF reported a net loss of EUR 17.9 billion down from EUR 5.1 billion in 2021. In addition to negative EBITDA, the bottom line was hit by a steep deterioration of the financial result due to the drop of dedicated assets in the wake of challenging financial markets.

The group guides for net debt/EBITDA equal to or below 3 for 2023, better than around or slightly above 3 that was guided previously.