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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Electricité de France    EDF   FR0010242511

ELECTRICITÉ DE FRANCE

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Electricite de France : France's EDF flags problems with nuclear welds, shares dive

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09/10/2019 | 10:52am EDT
Safety helmets with the logo of the Electricite de France (EDF) are seen at the coal-fired power plant in Cordemais

PARIS (Reuters) - French utility EDF has discovered problems with the weldings and other components in some of its nuclear reactors, it said on Tuesday, sending its shares down more than 8% as investors worried about potential closures.

EDF said in a statement its reactor building unit Framatome - formerly called Areva - had informed it of "a deviation from technical standards" in manufacturing of certain components on reactors that are currently in operation, notably the weldings on some of the reactors' steam generators.

An EDF spokesman said it was too early to say whether the problems could lead to reactor closures, but added several EDF reactors were affected by welding anomalies and the firm would provide more detail on individual reactors in the coming days.

He said not all of France's 58 reactors were affected as EDF also had other suppliers including Westinghouse and MHI, and that Framatome had not always used the same welding procedure that led to the problems.

Nevertheless, EDF's shares had plunged 8.4% by 1415 GMT, wiping nearly 3 billion euros ($3.3 billion) off its market value, and European power prices surged as investors worried about potential reactor shutdowns.

France has the world's second-largest fleet of nuclear reactors behind the United States and has exported its technology to China, Finland, South Africa and South Korea with Britain also set to use it.

Analysts said other countries were unlikely to be affected as they mostly operate different kinds of reactors or use different suppliers to replace their steam generators.

EDF's UK arm EDF Energy said it had no comment on whether there would be an impact on UK plants, but Areva did not build the 15 reactors that EDF owns and runs in Britain.

STEAM GENERATORS

France's nuclear regulator ASN was informed about the problem on Monday and will rule on any possible closures, the EDF spokesman said.

The ASN was not immediately available for comment, but Frederic Menage, head of nuclear safety at ASN's technical arm IRSN, told Reuters the weldings problems affected mainly EDF reactors whose steam generators had been replaced since 2008, notably its older 900 megawatt reactors.

Steam generators are massive heat exchangers weighing some 450 tonnes that generate steam to drive the power plant's turbines. They are typically replaced halfway through a pressurised water reactor's 40-year design life.

The generators are produced by welding steel rings together to form one massive cylinder. After the weldings cool, they need to be reheated to 600 degrees again to remove any tension that could lead to cracks or leaks.

Menage said a new procedure introduced from 2008 had not reheated the components evenly and that EDF and the ASN now needed to investigate.

"The problem is serious enough to redo the studies done at the design stage," Menage said. He added it was to soon to say whether the welding problems could lead to reactor closures or how long the study would take.

EUROPE PRICES SOAR

Any new reactor closures would directly impact the earnings of EDF, which generates the bulk of its power with its nuclear fleet, which accounts for about three quarters of French electricity generation.

Barclays said in a note the new problem markedly increased uncertainty for EDF.

"There should be a significant uplift in French and Central European power prices based on likely future French nuclear outages, which could potentially mean EDF having to buy French generation output that it is short at a premium price," it said.

German year-ahead baseload power, the European benchmark, gained 4% to 49.55 euros (44.10 pounds) a megawatt hour, its highest since Aug. 12. British wholesale gas prices also rose, with gas for winter delivery 2019 up 9%.

"The market does not know what to make of it. People fear the worst initially until there are further details," a London-based energy trader said.

In 2016, the ASN ordered EDF to close up to a third of its 58 French nuclear reactors for weeks for safety checks and repairs following problems with Areva-made components.

EDF has also suffered major new delays of up to three years on the nuclear reactor it is building in Flamanville, France, following the discovery of problems with weldings on the reactor's cooling circuit pipes.

(Additional reporting by Susanna Twidale in London; Writing by Sarah White and Geert De Clercq; Editing by Ed Osmond and Mark Potter)

By Benjamin Mallet and Geert De Clercq

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Financials (EUR)
Sales 2019 70 908 M
EBIT 2019 6 517 M
Net income 2019 2 717 M
Debt 2019 40 721 M
Yield 2019 3,21%
P/E ratio 2019 14,2x
P/E ratio 2020 11,1x
EV / Sales2019 1,02x
EV / Sales2020 1,08x
Capitalization 31 859 M
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