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EDF plans assets sale to trim debt on drop in profit in 2008

ELECTRICITE de France SA, Europe's biggest power producer, will sell assets to cut debt after 2008 earnings declined and missed estimates on costs associated with regulated power rates. Shares fell to a three-year low.

Net income fell 39 percent to 3.4 billion euros (US$4.4 billion), after a provision for the extension of regulated power rates known as the Tartam, the operator of France's 58 nuclear reactors said yesterday in a statement. That's below the 3.7-billion-euro median estimate of analysts surveyed by Bloomberg News.

The Paris-based utility will focus on cutting net financial debt by at least 5 billion euros over this year and next following two acquisitions in the past six months. It agreed in December to buy half the atomic power business of Constellation Energy Group Inc for US$4.5 billion and paid 12.5 billion pounds (US$17.8 billion) for British Energy Group Plc to drive nuclear growth.

"Things have grown very difficult," Ingo Becker, head of European utilities research at Kepler Capital Market, said yesterday in a telephone interview. "The Tartam provision itself was higher than expected. It's difficult to read anything positive into these results."

EDF fell as much as 8.3 percent to 32.60 euros, its lowest since January 9, 2006, and traded down 2.22 euros, or 6.2 percent, at 33.33 euros at 10:29am in Paris.

Ebitda rises

Earnings before interest, tax, depreciation and amortization rose 1.5 percent, excluding the provision for regulated rates, compared with company guidance for an increase of about 3 percent. Ebitda in 2008 rose to 15.4 billion euros from the previous year's 15.2 billion euros, and EDF said the lower pound cut United Kingdom Ebitda by 185 million euros.

EDF said it's now focusing on "organic growth through investment, primarily in France, improving its operational performance, integrating its new acquisitions, and reinforcing its financial structure."

Profit after one-time items is unlikely to rise in 2009, EDF said. It said it expects "moderate" growth in Ebitda as it integrates last year's acquisitions. British Energy will add about 1.5 billion euros to Ebitda in 2009, Chief Financial Officer Daniel Camus told reporters yesterday.

"We are not spared the crisis, but we are better protected than others," Chief Executive Officer Pierre Gadonneix told reporters, in a reference to recession in the United States and Europe. "France is less exposed to market prices."

EDF's Constellation Energy and British Energy acquisitions helped push net debt to 24.5 billion euros from 16.3 billion at the end of 2007.

Keen on deal

Centrica Plc, the UK's biggest energy supplier, said on Wednesday it's "keen to conclude" a deal with EDF to buy a 25-percent stake in British Energy. The company plans to pay about 774 pence a share, equivalent to 3.1 billion pounds, the same per-share price EDF agreed for the whole of British Energy.

"We don't exclude any component of our operations, in France or abroad," for possible sale, Gadonneix said.


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