Electricite de France S.A.

Financial leverage is high in light of the group's exposure to a drop in wholesale power prices in a context of ARENH asymmetry. EDF's adjusted financial leverage was around 4.3x at the end of 2019, comprising significant pension deficit and nuclear liabilities for asset dismantling and nuclear waste management. We believe this leverage is particularly high given the group's exposure to merchant power activities (about 57% of 2019 EBITDA for generation and supply) and the sensitivity of credit metrics to power prices. In addition, EDF's sizable capital expenditure (capex) puts pressure on cash flows, which will result in increasing debt in coming years. The plans include very high maintenance and upgrade expenditures on the existing French nuclear fleet and construction

...EDF had limited financial headroom ahead of the COVID-19 pandemic because of power price exposure and high capex. Financial leverage is high in light of the group's exposure to a drop in wholesale power prices in a context of ARENH asymmetry. EDF's adjusted financial leverage was around 4.3x at the end of 2019, comprising significant pension deficit and nuclear liabilities for asset dismantling and nuclear waste management. We believe this leverage is particularly high given the group's exposure to merchant power activities (about 57% of 2019 EBITDA for generation and supply) and the sensitivity of credit metrics to power prices. In addition, EDF's sizable capital expenditure (capex) puts pressure on cash flows, which will result in increasing debt in coming years. The plans include very high maintenance and upgrade expenditures on the existing French nuclear fleet and construction of nuclear power plants in France and the U.K. This comes on top of ambitious investments in renewables and...

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