2 April, 2002 – Electricité de France (EdF), the French state-controlled utility, has reported a decline in profitability of 26 per cent largely due to losses from its expanded overseas operations.
For 2001 EdF reported a profit of €840m, down from €1.4bn in 2000. Much of the blame for the fall in net profit lay in Latin America, where EdF’s operations in Argentina and Brazil lost €545m after foreign exchange losses of €702m.
A further negative contribution of €781m from currency translation adjustments brought the total impact on EdF’s equity to €1.33bn. “That’s the bill EdF has paid for the Latin American crisis,” said Jacques Chauvin, chief financial officer.
Edenor, the company’s Argentinean business lost €270m and Light, the Brazilian business, notched up a similar deficit. EdF plans a recapitalization of Light in the form of a conversion of debt to equity and capital injection.
In addition, EdF took a €170m hit to its bottom line from EnBW, the German group in which it has a 34.5 per cent stake. Although EnBW was profitable under German accounting conventions, the application of French accounting rules and various write-offs by EdF weighed on the French group’s 2001 profits.
On the domestic front, EdF has faced public service obligations which has cost it €1.1bn, some €620m more than last year.
EdF’s accounts were boosted by a €652m exceptional gain, mainly from property sales, compared with a gain of just €71m the previous year. But the company said it had suffered from being obliged to buy electricity from renewable energy sources, and from a tax charge that rose to €577m from €28m.
Net debt rose to €22.2bn from €17.6bn, mostly as a result of EdF’s recent buying spree.
The group has faced criticism over its foreign expansion strategy while benefiting from a protected home market but with EU agreements in place to enforce energy market liberalization, EdF plans to press ahead with its plan to generate 50 per cent of its revenues from outside of France by 2005. At present a third of EdF’s power sales comes from overseas operations and sales rose 18 per cent during 2001.
EdF has a three-year programme to invest €19bn on international investment, of which €8bn has already been allocated. “Our priority is Europe,” said Franccois Roussely, EdF chairman.
Standard & Poor’s said today that its outlook on Electricité de France (AA+/Negative/A-1+) remains negative, following the publication of the company’s results .