The Group must at all times have sufficient financial resources to finance its day-to-day business activities, the investments necessary for its expansion and the appropriations to the dedicated portfolio of assets covering long-term nuclear commitments, as well as to deal with any exceptional events that may arise.
The EDF group was able to meet its financing needs by conservative liquidity management, and has obtained financing on satisfactory terms.
The Group’s ability to raise new debt, refinance its existing indebtedness or, more generally, raise funds in financial markets, and the conditions that can be negotiated to this effect, depend on numerous factors including the rating of the Group’s entities by rating agencies. The Group’s debt is periodically rated by independent rating agencies. Any downgrading of EDF’s debt rating could increase the cost of refinancing existing loans and have a negative impact on the Group’s ability to obtain financing. To meet liquidity needs, the Group has a significant cash reserve. Hybride missions may be considered. To this end, on 8 September 2020, EDF issued bonds with an option to convert and/or exchange them for new and/or existing green shares (“Green OCEANEs bonds”) for a par value of €2,400 million and an issue value of €2,569 million.
Furthermore, a range of specific levers are used to manage the Group’s liquidity risk:
The Group’s development strategy, changes in the scope of activities and synergies within the Group, risk not being implemented in accordance with the objectives defined by the Group, even though it faces increased competition on European energy markets, particularly on the French electricity market, which is its main market.
In France, since 1 July 1 2007, the electricity market has been totally open to competition. All EDF customers can select their electricity supplier (see section 1.4.2.1“Presentation of the market in France”). In a context of escalating competitive intensity (new customer expectations, new regulations, emergence of new players, mergers between existing operators, changes in market prices, etc.), these changes, at constant consumption and price levels, have had and may have in the future a negative impact on the Group’s sales in France. EDF must therefore adjust its marketing expenses; insufficient adjustment could have a negative impact on its profitability. In addition, the Covid health crisis could have an impact on demand and weaken the economy, which could result in unpaid or uncollectable debts. Else wherein Europe, the Group faces different situations, depending on the local competitive conditions (totally or partially open markets, position of competitors, regulations, etc.). The type of competition faced by the Group, the evolution over time of such competition and its effect on the Group’s activities and results vary from one country to another. These factors depend in particular on the market depth and its regulations in the country in question and on other factors over which the Group has no control.
In this context, particularly following the development of low-carbon electricity uses and energy services and energy efficiency, the Group may not be able to defend its market share, to reach its downstream low carbon goals, or gain market shares as expected, or it may see its margins decrease, which would have an adverse effect on its activities, its strategy and its financial position.
Furthermore, the Group, in line with its raison d’être and its CSR commitments, intends to continue its development as a high-performance and responsible electricity company, championing low-carbon growth in France, in its core countries in Europe (United Kingdom, Italy, Belgium) and in other countries where the Group operates in accordance with the CAP2030 strategy. This strategy combines the search for growth drivers with the promotion of existing assets. The strategy and drivers of the Group’s transformation are described in section 1.3 “Group Strategy and objectives”.
Weak synergy in the deployment of the Group’s model, particularly upstream/downstream integration or in the enhancement of the complementarity of the divisions and the diversity of the solutions deployed by the Group, (see section 1.4 “Description of the Group’s activities”), could lead to an increase in risks related to physical and market contingencies, and to a loss of gross margin, to the detriment of customers, subsidiaries and the Group’s performance. In addition, insufficient emphasis on geographic diversification, or on the diversification and complementarity of the low-carbon industrial solutions offered by the Group, or a reduction in the cross-functional synergies deployed within the integrated Group could reduce the Group’s ability to deal with the seasonal nature of the electricity generation and sales business, the diversity of local expectations and the proximity of its customers and stakeholders, and the efficiency and therefore the competitiveness of the low-carbon industrial solutions implemented.
