* 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 two pct in afternoon trade
(Adds CEO comment on 2017-18 outlook, stock price)
By Geert De Clercq
PARIS, Feb 14 French utility 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 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 said core earnings would fall further to
13.7-14.3 billion euros this year but it expects 2018 earnings
would then recover to at least 15.2 billion euros ($16.13
"The year 2017 will still be difficult, but we should hit
the bottom of the cycle and 2018, I commit to that, should be
the year of the rebound," Chief Executive Jean-Bernard Levy
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.
EDF shares, down 2 percent, were among top losers on the
Paris bourse. They are down 20 percent over the past six months,
making them the second-worst performers in the Thomson Reuters
Europe utility index.
EDF has been wrestling with heavy debts and has had to
borrow just to pay dividends for several years. It had negative
2016 cash flow of 1.6 billion euros, and 2.1 billion in 2015.
The firm noted that its forecast for positive 2018 cash flow
after dividends did not include costs related to its Linky
smartmeter rollout, new developments and asset sales, and
excluded the advance on the interim dividend for that year.
Levy said that cost savings, asset sales, lower investments
and a state-funded capital injection will boost EDF's finances
by next year.
EDF and its Chinese partner CGN need to finance the 18
billion pound (21 billion euros) build of two nuclear reactors
in Hinkley Point, Britain and it also faces 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 Westinghouse' problems ought to benefit EDF-Areva,
their 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.
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.
(1 euro = 0.8512 pounds)
($1 = 0.9426 euros)
(Editing by Sudip Kar-Gupta and Alexander Smith)