February 14, 2017 / 7:43 AM / 5 months ago

CORRECTED-UPDATE 2-EDF targets positive cash flow ahead of French, UK nuclear projects

4 Min Read

(Corrects Hinkley Point figure in paragraph 6)

* Cash burn narrows to 1.6 bln euros from 2.1 bln

* Sticks to target for positive cash-flow in 2018

* New stock dividend will keep cash in the group

* Shares down 0.5 pct in early trade

By Geert De Clercq

PARIS, Feb 14 (Reuters) - EDF pledged on Tuesday to deliver positive cash flow next year before it has to invest in upgrading its ageing French nuclear plants and building new reactors in Britain.

The French utility, which is 85-percent state-owned, made the commitment as it posted a 6.7 percent fall in 2016 core earnings to 16.41 billion euros following the temporary closure of about a third of its French reactors last year for safety checks.

EDF has been wrestling with heavy debts and has had to borrow just to pay dividends for several years. It had negative cash flow of 1.6 billion euros last year, and 2.1 billion euros in 2015.

CEO Jean-Bernard Levy said that cost savings, asset sales, lower investments and a state-funded capital injection will boost EDF's finances by next year.

"The year 2018 will be the year of the rebound," he said.

EDF needs to finance the 18 billion pound (21.15 billion euros) build of two nuclear reactors in Hinkley Point, Britain and a 50 billion euro upgrade of its French nuclear stations over the next decade.

It also needs to spend 5 billion euros on smart meters and billions more buying and restructuring the nuclear reactor unit of fellow state-owned company Areva.

Levy declined comment on Japan's Toshiba, which on Tuesday said it expected to book a $6.3 billion hit to Westinghouse and postponed its 2016 results by a month as auditors try to determine its U.S. nuclear business' liabilities.

Westinghouse's AP1000 reactor is the main competitor for the Areva EPR third-generation reactor that EDF plans in Britain. Such reactors have improved safety features, but are more costly to build. Delays mean none have yet been connected to the grid.

While problems at Westinghouse ought to benefit the French nuclear industry, EDF-Areva's chances of winning new export contracts are slim due to new safety requirements following the 2011 Fukushima disaster, competition from Chinese, Russian and Korean reactor makers and ever-cheaper renewables, industry sources say.

Capital on Horizon

EDF said its planned capital raising should be launched before the end of March, market conditions permitting, after its board approved a 4 billion euro increase on Monday. The French state is set to subscribe for 3 billion euros.

It is planning a share dividend for the second year running, to which the state will again subscribe. By taking this option last year it left an extra 1.8 billion euros in EDF's coffers.

EDF said it plans to distribute 2.1 billion euros in dividends on its 2016 earnings, but the dividend per share will not be announced until the capital increase is launched.

Shares in EDF were down 0.5 percent following the results. They have lost about 20 percent over the past six months, making them the second-worst performers in the Thomson Reuters Europe utility index.

EDF's 2016 revenues fell 5.1 percent to 71.20 billion euros, while net income rose 140 percent to 2.85 billion due to lower impairment losses in 2016, and the extension to 50 years of the accounting depreciation period of some of its nuclear plants.

EDF set a core earnings target of 13.7-14.3 billion euros for 2017 and of at least 15.2 billion euros for 2018.

Levy said the higher 2018 core earnings target should be achievable thanks to higher power prices, further cost cuts and the gradual return to a normal nuclear output in France.

This year, French nuclear power production will be capped by planned maintenance and the continued outages of EDF's Bugey 5, Fessenheim 2, Gravelines 5 and Paluel 2 reactors, which have been shut for months due to safety and technical problems. (1 euro = 0.8512 pounds) (Editing by Sudip Kar-Gupta and Alexander Smith)

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