PARIS (Reuters) - EDF dropped on Monday a pledge to report positive cash flow in 2018 after delays in its plans to restart nuclear reactors, sending the French utility’s shares down 13 percent.
EDF, 83 percent owned by the state, has for years borrowed to pay dividends to a cash-strapped government, racking up net financial debt of 31 billion euros.
To break the cycle, former CEO Henri Proglio had in 2013 pledged to return to positive cash flow after dividend payment in 2018. His successor Jean-Bernard Levy confirmed the target in 2014 and this was repeated as recently as February this year.
But pressure on earnings has risen since the state forced EDF to buy reactor builder Areva NP, the British Hinkley Point nuclear project ran over budget and manufacturing problems at an Areva nuclear foundry led to plant outages and cost overruns.
On Monday EDF cut its target for 2018 core earnings before interest, tax, depreciation and amortisation (EBITDA) to 14.6 billion to 15.3 billion euros from at least 15.2 billion euros, and said its cash flow would be “slightly positive or close to balance”, scaling back its previous cash flow pledge.
EDF shares fell as much as 13 percent by 1115 GMT, the worst intraday fall since the firm’s 2005 listing.
Less than two weeks ago, the firm had cut its 2017 core earnings and nuclear output target.
EDF has reported three Level 2 safety incidents in its ageing reactors since June, where Level 7 is a major accident. That compares with just five cases between 2003 and 2016.
The incidents covered rusty pipes in its Belleville plant, weak dikes protecting its Tricastin plant from flooding and faulty backup diesel generators at 20 reactors.
Tricastin was shut until the end of November, forcing the firm to cut 2017 core earnings guidance by two percent and to reduce its 2017 nuclear output target a second time this year.
EDF’s woes echo those of British nuclear operator British Energy in the 2000s when prolonged plant outages, weak power prices and rising costs led to a call for state aid. British Energy was then renationalized before EDF bought it in 2008.
Despite the setbacks, EDF shares had climbed more than 40 percent in the past six months as investors expected most reactors to restart early next year, keeping cash flow targets on track. Investors had those hopes knocked on Monday.
“This came as a complete surprise,” one analyst said, adding that he expected the company would provide more details when it reports nine-month earnings on Tuesday.
In recent years, EDF had whittled away at its cash flow target in footnotes to its results. It had excluded from its calculation investments in smart meters, “new developments and asset disposals” and the 2018 interim dividend payment.
EDF did not detail its expected capacity levels for early next year but said on Monday it would face a “a lower availability of some nuclear reactors at the beginning of 2018.”
It also said net investments in 2018 should reach close to 11 billion euros, half a billion more than an initial target.
Reporting by Geert De Clercq; Editing by Dominique Vidalon and Edmund Blair