EDF Energy has reported a sharp drop in profits in 2016 due to low wholesale gas and electricity prices and continuing customer losses in the face of “strong competition”.
Earnings before interest and taxation (EBIT) fell by 29 per cent when compared 2015 to £470 million as customer numbers fell by 80,000 to 5.2 million.
Earnings before interest, tax, appreciation and amortisation (EBITDA) fell by almost a quarter year-on-year to €1,173 million (£995 million). There was less a dramatic decline of 12.3 per cent when accounting for the fall in the value of the pound following the Brexit vote, which shaved €253 million (£215 million) from the supplier’s EBITDA.
Revenues also fell by around by around quarter to €9,267 million (£7,859 million). The decline in sterling was responsible for the more than half – or €1,313 million (£1,114 million) – of the €2,355 million (£1,997 million) decrease. Sales dropped by just 9 per cent when adjusting for the lower exchange rate.
“The decline in UK sales is mainly explained by the lower electricity and gas prices on the wholesale markets, and the lower volumes of electricity sales to final customers, which reflect the falling customer numbers caused by a strong competition,” the supplier said.
The fall in profits came despite “the excellent performance of nuclear generation and the continuation of the cost savings plan [which] partially offset the highly negative impact of falling prices and increased competition”.
Operational expenditures by were cut by 3.6 per cent when compared with 2015 and nuclear output in the UK rose by 4.5TWh to a “record high” of 65.1TWh.
EDF Energy invested £675 million into existing nuclear, coal, renewables and its retail operations over the year, with £529 million of that going towards existing generation. A further £860 million was spent of new nuclear.
It took a write-down of €347 million (£294 million) on its assets – €187 million (£159 million) when adjusted for the exchange rate – mainly relating to its coal and gas-fired plants.
The supplier installed a total of 130,000 smart meters in 2016. It is currently fitting another 900 each day but plans to increase that number to 2,300 by the end of 2017.
EDF Energy chief executive Vincent de Rivaz said: “The exceptional performance of EDF Energy’s existing nuclear power stations is making a huge contribution to security of supply and providing large volumes of reliable, low carbon electricity. Our new nuclear power station at Hinkley Point C will play a vital role as the UK continues to make the transition away from fossil fuels.”
“Our investment in renewables and innovative battery technology is further evidence of our ambition to be at the forefront of the UK’s low carbon future,” he added.
EBITDA for the whole of the EDF Group fell by 6.7 per cent to €16.4 billion (£13.9 billion) and sales were down 5.1 per cent at €71.2 billion (£60.4 billion). Among the causes was a large drop in French nuclear output due to safety inspections on 18 of its reactors at the request of the country’s nuclear regulator ASN. EDF was forced to extended maintenance and refuelling at other reactors to accommodate the tests.
Output during 2016 was down by 32.8TWh when compared to the previous year to 384TWh and there was a knock-on effect on the UK market which saw rising prices due to the lower availability of interconnector imports. EDF said it has so far received approval from ASN to restart 17 of the 18 reactors, with only the Civaux 1 reactor still undergoing inspection.