Electricite de France : Transcript of the Q1 2022 Investors and Analysts conference

Sales & Highlights First Quarter 2022

4 May 2022

Sales & Highlights First Quarter 2022

Xavier Girre

Group Senior Executive Vice President Finance

Good morning, everybody. I am pleased to welcome you to this conference call. I will present you the sales of Q1 2022, starting with the main highlights. As usual, I will leave as much time as possible for the Q&A session.

Key Operational Indicators - Q1 2022

Let's start with the key operational indicators of the first quarter.

French Nuclear output decreased by 7.5TWh or -7.6% at 91.7TWh. This is a consequence of lower availability of the Nuclear fleet mainly due to the impact of stress corrosion indications.

Nuclear output increased by 8.6% in the UK at 11.4TWh due to better availability of the fleet despite end of generation for Hunterston in January 2022.

Wind & Solar output reached 6.5TWh, a 28% increase versus Q1 2021 thanks to the commissioning of new capacity in 2021 and to favourable wind conditions in the UK and the USA in Q1 2022.

On the contrary, Hydro output in France decreased by 31.5% year-on-year due to significantly lower hydroelectric conditions during Q1 2022, whereas Q1 2021 was above average.

Carbon intensity decreased to 54g CO2/kWh this quarter from 56g CO2/kWh in Q1 2021.

Last indicator: Wind & Solar capacities under construction remained very high at 7.9GW gross at the end of March 2022.

Q1 Highlights

Strengthening of the Financial Structure & Liquidity

Let me now update you on some highlights of the period. At Group level we strengthened the financial structure and liquidity of the Group with a rights issue for €3.15 billion. We also signed three-year bilateral term loans for a total amount of circa €12 billion.

Existing Nuclear in France

In France the Board approved the launch of the second phase of the Grand Carénage programme for the period from 2022 to 2028. It will cover the first ten-year visits for the 1,300MW fleet and the studies and some works allowing the fleet to operate beyond 50 years. On the stress corrosion matter, investigations are underway. The Group has ongoingexchanges with the ASN. Regis Clement, Deputy Head of Nuclear Generation Division, is with me today to answer any questions you may have on that matter.

United Kingdom

In the UK, the British government announced its target to triple nuclear installed capacity to 24GW by 2050. The Nuclear Energy Financing Act was enacted on 31 March, allowing the implementation of a Regulated Asset Base model for new nuclear projects.

Renewables

Renewables keep on developing, with the award of the seabed lease in New York Bight to develop offshore wind energy of 1.5GW with Shell, and of seven solar power plant projects in France for a total capacity of 110MW. The first offshore wind turbine in France was installed in April in Saint-Nazaire.

EDF Innovation to Net Zero: Launch of the Hydrogen Plan

As regards innovation, the Group has launched its Hydrogen Plan aiming at becoming a European leader in 100% low-carbon hydrogen generation by 2030 and at developing 3GW-growth of low-carbon hydrogen generation projects by 2030 worldwide.

Customers

As regards customers, the number of electricity, gas and services contracts has increased regularly since last September. In Q1 2022 it represented a positive 190,000 net variation versus a negative 126,000 in Q1 2021. Though it is a great long-term commercial news, it could have nevertheless a short-term negative impact on the EBITDA of the Group depending on the price of the sourcing needed.

ESG

'Say on Climate' resolution on the Group's climate transition plan to contribute to achieve carbon neutrality by 2050 will be submitted to the shareholders' assembly next week.

Impact of the Ukrainian Conflict

As regards the Ukrainian conflict, to-date, the Group has no exposure to Russian companies affected by international sanctions. It has no long-term gas contracts with Russian companies. Edison has a 1Bcm short-term contract for balancing purposes with Gazprom Italia which is expiring end-2022. It represents less than 10% of Edison's supply and is not significant at Group level. The Ukrainian conflict has an indirect impact on the Group related to the increase in market price volatility penalising EDF in a context of significant buybacks in the markets and to some tensions in supply chain, as of today.

On top of that, some regulatory steps have a negative impact, in particular in Italy. The taxation of extra profit has a significant impact on Edison's net results, as you can see on Edison price release this morning.

Q1 2022 Key Figures & Highlights

Let's now review the sales for the first quarter which increased organically by +61% versus Q1 2021.

Power prices have increased strongly as compared to Q1 2021, leading to a positive price effect on sales in the four key European countries of the Group. At an EBITDA level, though, this impact is more than offset by significant buybacks at very high prices due to the level of output in France.

The second element: the resale of purchase obligations in France at much higher prices in Q1 2022 versus Q1 2021. This has no impact on EBITDA because of the CSPE mechanism and has a temporary positive impact on working capital.

The third element: the very significant rise in gas prices. As the sourcing cost has risen at the same time, the impact on the EBITDA of the Group remains limited.

To wrap up, sales increased very significantly year-on-year but only a small portion of it has an impact on EBITDA as most of these effects are almost passed through or because the sourcing of costs has increased in a similar way. I will come back to 2022 EBITDA later on.

Q1 2022 Group Sales by segment

This slide, number eight, shows the main variation of the sales by segment. As you can see, nearly all segments booked a positive variation, the most significant ones in value being France Generation & Supply, Italy and the Other Activities segments. I will focus first on the segments with the most significant variations in value, and then come back to this slide for the other segments.

Sales France - Generation and Supply Activities

Let's start with France Generation & Supply activities. Sales increased by €4.1 billion, from €8.8 billion to €12.9 billion, a 46.4% organic growth.

Turnover increased mainly due to favourable price effect for an estimated €2.3 billion. This is explained notably by the rise of power prices on the market leading to an increase of the regulated sales tariff excluding taxes as well as increased selling prices to professionals. Nevertheless, decline in nuclear output and, to a lesser extent, in hydro generation, required buybacks at very high prices with negative impact on EBITDA.

Second block, a negative volume effect for less than €0.1 billion. Indeed, even though the balance in electricity contracts is positive since September 2021, its level is still below the one of Q1 2021.

The milder winter in 2022 represented a decrease in sales estimated at -€0.2 billion.

The Group presented a net purchasing position on the wholesale market for Q1 2022 which does not contribute to turnover but to the cost of goods sold, unlike Q1 2021 when it had a net selling position. This reflects the lower sales volume in 2022 due to the decrease in Nuclear and Hydro output. The impact on turnover was estimated at minus €0.2 billion.

The resale of purchase obligations increased by an estimated €1.5 billion in connection with the rise of spot prices. This is a pass-through mechanism and has no impact on EBITDA.

Last, the other effects improved by €0.8 billion. It is mainly linked to the energy sales by aggregator entities and to the gas supply sales, with limited EBITDA impact. For example, Agregio is a subsidiary of EDF with a portfolio of more than 4GW under contract in 2021, which optimises renewable energy generation, demand response and storage assets' flexibility. The power prices increase has mechanically increased the value of their resales on the market.

Sales France - Regulated Activities

Sales of Regulated Activities increased by €0.4 billion, a 7.2% variation. It is mostly explained by a positive price effect estimated at €0.4 billion, due mainly to the increase in power and gas prices for island activities and Electricité de Strasbourg, and to the favourable revision of the TURPE 6 indexation on 1st August 2021. The growth in volumes distributed excluding climate effect also contributes to this positive evolution for an estimated €0.1 billion. On the other hand, the milder weather in Q1 2022 versus Q1 2021 had an estimated impact of minus €0.1 billion.

United Kingdom

In the UK, sales increased by €0.7 billion, a +26.6% organic variation which is mainly explained by the retail activity which benefitted from the sharp rise in electricity and gas prices. However, for the residential customer segment, the increase in energy prices was not fully passed on to the customers with a capped tariff. B2B volumes contributed positively year-on-year with a plus 9%-increase.

Italy

Italy's sales increased by 3.5x from €2 billion to €7 billion. This is mainly explained by the gas activities with a €3.7 billion increase in sales in connection with the sharp rise in gas prices on the wholesale market. The impact on the EBITDA is nevertheless limited as the sourcing costs have increased meanwhile. The electricity business increased by €1.3 billion, as a consequence of the rise in electricity prices, with limited EBITDA impact, and of a positive volume effect on thermal generation following the increase in the clean spark spread.

Other Activities

Q1 2022 revenue for Other Activities segment is up 3.9x organically compared to Q1 2021.

The Group's gas activities revenue increased significantly in the context of a sharp rise in gas prices on the wholesale markets for around €1.3 billion and better use of the Group's capacity for around €1.0 billion, with a significant increase in the number of LNG cargo ships delivered to France. However, these effects are limited in terms of EBITDA.

EDF Trading delivered once again a strong trading and optimisation performance across all desks during Q1 2022 thanks to the high price and volatility market environment.