Electricité de France S.A (OTCPK:ECIFF) Q2 2022 Results Conference Call July 28, 2022 2:30 AM ET
Company Participants
Jean-Bernard Levy – Chairman & CEO
Xavier Girre – Group Senior EVP of Group Finance
Conference Call Participants
Arthur Sitbon – Morgan Stanley
Vincent Ayral – JPMorgan
Sam Arie – UBS
Jean-Bernard Levy
Good morning to all. We’re delighted to welcome you to this presentation of EDF Group’s 2022 first semester results. In a few minutes, Xavier Girre, CFO, will present our results in more detail. We will both answer your questions. But first, I would like to point out our key performance indicators and review the highlights of the last 6 months.
In S1 2022, nuclear power generation in France reached 154.1 terawatt hours, which is 27.6 terawatt hours less than in the same period in 2021. This is due to lower plant availability following the discovery of size of stress corrosion, and despite fewer unforeseen events and an optimized production schedule, the total generation is below the previous year.
Hydroelectric generation in France is also below the previous year, it reached 18.9 terawatt hours, down by 5.7 terawatt hours. This is in the context of historically low water levels as a logical consequence of the draft in France. Our carbon intensity, which is already 5x lower than the European average, remained stable, in line with what we had in the first 6 months of 2021. In the United Kingdom, nuclear generation stood at 23.2 terawatt hours, up by 2.3 terawatt hours compared to the first 6 months of 2021.
EDF Group’s wind and solar power production reached 12.9 terawatt hours, up 20.7% when compared to the first half of 2021. Our portfolio of worldwide wind and solar projects amounts to 82 gigawatt growth compared to 76 at the end of ’21. These are very good results. They confirm our path for growth in renewable energies.
EDF Group’s EBITDA shows a fall of 75%. This reflects the company’s difficulties in nuclear generation, and to a lesser extent, hydroelectric generation. EDF have also been affected by the regulatory measures in France to cap price increases in 2022. Nevertheless, EBITDA includes the exceptional performance of EDF Trading and also better generation from our nuclear fleet in the United Kingdom.
Our net current income has decreased by €5.1 billion compared to the first half of 2021. It stands at €1.3 billion negative. Net income group share amounted to €5.3 billion negative at the end of the first half of 2022, down by €9.6 billion. Net financial debt stood at €42.8 billion at the end of June 2022 following the €3.1 billion rights issue last April, and a significant improvement in working capital requirements. At the end of June, we had €29 billion net liquidity.
Next slide talks about the state ownership, which is expected to rise maybe up to 100%. As I’m sure you know, on July 19, the French government announced how it will enact its intention to take 100% stake in EDF’s capital. A simplified public purchase offer will be launched, should be done at the beginning of September. The goal of the project is to enable EDF to implement ambitious and essential projects in energy transition.
Since these announcements, EDF’s Board of Directors has set up an ad hoc committee within the Board to present to the Board an independent expert report on the financial conditions of the state’s offer. The financial experts — independent financial experts, was designated yesterday. If the conditions for this implementation are met, the purchase offer will be followed by a squeeze out of all the shares and convertible bonds we call them OCEANE, which are not today held by the French government after the buyout. The total buyout for shares and convertible bonds is estimated at approximately €9.7 billion.
The next slide talks about the stress corrosion phenomenon, and it will start with a video.
[Audio-Video Presentation]
Jean-Bernard Levy
As you just saw in that video, the inspections, investigations and analysis carried since May have enabled EDF to determine which reactors are most sensitive to the phenomenon, have enabled EDF to identify the specific zone to be monitored within the scope of our maintenance programs, and also has enabled EDF to continue the program of inspections across the entire fleet. Yesterday, the French nuclear authority has publicly judged our global strategy as appropriate.
Next slide is about the war in Ukraine. EDF is exposed to some consequences of the war in Ukraine. First, extreme tensions on the electricity market in a context of declining nuclear output requiring a high level of purchases in the market at very high prices. Secondly, we have seen considerable volatility in the price and availability of raw materials and certain components, leading to supply difficulties for some of the group’s businesses and key projects. However, impacts on gas and uranium supplies are real, but very limited. For example, we have a single gas contract with a Russian operator through our subsidiary, Edison. It represents only 4% of the group supplies, and it would any way going to expire at the end of 2022. We also have low dependence on imports of Russian uranium given the stocks we have built up and a long-term diversified supply contract base.
The war in Ukraine has also impacted the financial markets, reducing the value of listed assets held in our dedicated assets area. On the other hand, interest rates have risen faster than inflation, reducing the level of nuclear provisions, which is favorable. As a result, the coverage ratio of nuclear provisions by dedicated assets stands at 105.3% at the end of June. This number is slightly down on what it was at the end of December.
In May 2021, the General Assembly approved our Raison d’être, which feeds into all our businesses and lies at the heart of our social and environmental responsibility policy. In this context, we have set ourselves ambitious targets, and we pursue them vigorously. This year, we presented all shareholders with a climate resolution for the first time. It was adopted by 99.87% of our shareholders. In sustainable finance, 84% of our credit lines are indexed on ESG indicators. That means a total of €10 billion. These figures show that sustainable finance tools are at the heart of EDF’s financing strategy.
We are also very happy to announce that EDF is the first major group to publish its impact score and commit to a transparent process of improvement. We have achieved a score of 68 out of 100, which is higher than the average score of companies that have previously disclosed their impact score. This average is 55 out of 100. These targets, these measures will enable us to attract new talents. Today, we are the preferred company in France for students and young graduates in the energy sector. And all in all, we rank 4th among the most attractive employers for engineers.
Finally, we are extremely proud that we have received the ESG Information Award at the new edition of the 2022 Transparency Award. This ESG Award recognizes the transparency and the quality of our nonfinancial information.
Now I would like to highlight a few events that have marked the beginning of the year. Let us start with new nuclear. In the United Kingdom, we recently revised the schedule and the cost of building the 2 Hinkley Point C EPR reactors. Unit 1 is scheduled to start producing electricity in June 2027. The project’s full cost is now estimated in 2025 — sorry, in 2015 pounds, in 2015 pounds between GBP 25 million and GBP 26 billion. We are very pleased that the British government has approved the construction of the Sizewell C nuclear power plant, 2 EPR units very similar to Hinkley Point. This reaffirms the British government’s confidence in nuclear as part of its climate ambition.
EDF, we accelerate the development of our small modular reactor NUWARD. This will be supervised through an early joint regulatory review, led by the French Nuclear Safety Authority with the participation of the Czech and the Finnish safety authorities. This initiative is the first of a kind in European regulatory cooperation between several countries regarding nuclear reactors. And it will support the implementation of an international SMR licensing strategy.
We also welcome, of course, the final decisions made by both the European Council and the European Parliament to include nuclear power in the European Taxonomy. This recognizes the role of nuclear energy confirming the opinions of majority of experts such as the IPCC or the IEA. We’re happy because we worked very hard to achieve this.
The final decisions of the European Council and Parliament, they mean several things. Firstly, optimized financing conditions for investment programs in existing assets, but also in future projects. Secondly, this taxonomy will contribute directly to the achievement of the European Union’s climate objectives. At EDF and in line with the European Taxonomy, we recently published our new green financing framework to reflect the best practices on the market.
The slide on renewables and on customers and services will show you the scale of our ambitions. Our project portfolio in renewables stands at 82 gigawatt growth. This is 9% above what it was 6 months ago. We’ve met with major success both in India and in the United States. We are proud that we have now produced the first megawatt hours through the Saint Nazaire offshore wind farm. So far, 56, that is exactly 70%, 56 out of the 80 wind turbines to be built, they have been installed.
In terms of customers and services, we have many reasons to be satisfied. Sales performance has been excellent, reflecting the relevance of our offers and the quality of our relationship with all categories of consumers. We are growing the number of electricity service and gas contracts per customer in line with our target of reaching 1.5 by 2030. We have signed nearly 520,000 gas and service contracts over the last 12 months. The number of our residential customers on market offers for electricity supply was 1.7 million at the end of June. This is a growth of 18% when compared to the end of December 2021.
Our sense of innovation and mobility and in green hydrogen has led to several promising advances. The EU has approved the French government aide for the hydrogen plan as part of IPCEI for the McPhy gigafactory project in Belfort, which will reach 1 gigawatt of production of electrolyzers every year.
Recently, we took part in fundraising for the English startup Carbon8. Carbon8 solution will allow our industrial clients to rapidly accelerate the decarbonization and transition to a more circular economy. This is a vision that we share. We believe it is essential to achieve carbon neutrality by 2050.
At the end of June 2022, EDF Group continues to contribute to energy transition with more than 240,000 charge points for vehicles installed and managed. 240,000 is up 26% on what we had at the end of 2021.
We’re also proud to note that all the concessions in Mainland France held by our independent subsidiary Enedis have now been renewed for an average duration of 30 years, and that the number of new connections to the grid has been growing during the first 6 months of the year, in particular with renewable energy producers.
And we now — I will now hand over to Xavier Girre. Xavier will be providing more details concerning our financial results.
Xavier Girre
Thank you, Jean-Bernard. Good morning, everybody. I will now detail and explain our ’22 half year results.
Let me start with the key figures. Sales increased very materially to €66.3 billion, a 66% organic growth. This is mainly the consequence of three elements. First, the surge in power prices leading to a positive price effect on the sales in the 4 key European countries of the group. In France, though, these price effects were largely reduced by the impact of the tariff shield and the replication in the users of the additional rent volumes, in the offers of the additional rent volumes. Second, the rise in gas prices. As the sourcing cost has risen, at the same time, the impact on EBITDA remains limited. Third, the resale of purchase obligations in France at much higher prices. This has no impact on EBITDA because of the CSPE mechanism.
EBITDA decreased by 75% to €2.7 billion, mainly a consequence of the power purchases at high prices on the market due to the decrease in nuclear and to a lesser extent, hydraulic output in France and of the regulatory measures in France. Net recurring income stood at minus €1.3 billion compared to positive €3.7 billion in H1 ’21. And the net income group share decreased from €4.2 billion 1 year ago to minus €5.3 billion for H1 ’22, taking into account the decrease in the fair value of the financial assets.
Net financial debt was stable at €42.8 billion, a €0.2 billion decrease versus end ’21, mainly as a consequence of the rights issue carried out in April and the positive working capital change, which compensated the drop in EBITDA.
As you can see on this bridge, the EBITDA fall is concentrated on France – Generation and Supply activities. Most of the other segments recorded a growth, in particular, EDF Trading, presented in the Other activities, the U.K., EDF Renewables and Italy.
Let me now focus on the segments of the group with the most significant evolution. Starting with France – Generation and Supply activities, down from plus €4.8 billion in H1 ’21 to minus €5 billion in H1 ’22. The first 3 blocks show the situation at end of June as it was disclosed in the ’21 full year presentation concerning the ’22 EBITDA. First, a positive price effect before regulatory measures and regulated and market offers for an estimated plus €3.9 billion.
Second, the negative impact of the additional ARENH volumes for minus €6.2 billion, of which minus €3.5 billion include the cost of the 6.5 terawatt hours additional volumes already delivered to alternative suppliers over Q2 for an estimated minus €1.4 billion plus the corresponding impact on both regulated and market offers since April 1 as well as a tariff shield to limit the increase of the regulated tariffs for minus €2 billion. And minus €2.7 billion correspond to a provision for the additional 13 terawatt hours ARENH volumes to be delivered to alternative suppliers in H2 ’22.
Third, the decrease in nuclear output of minus 27.6 terawatt hours for an estimated minus €7.3 billion. The decrease was due primarily to the impact of the stress corrosion phenomenon for an estimated minus 36.6 terawatt hours. These outages compelled the group to purchase power in the market at very high prices.
The fourth block corresponds to the hydronic output. In the context of historically poor hydropower conditions, output decreased by minus 5.7 terawatt hours with a negative impact on EBITDA of minus €1.4 billion.
France – Regulated Activities remained almost stable at €3.2 billion. U.K. EBITDA increased significantly from €0.3 billion to €0.9 billion. This is mainly explained by improved generation and optimization of the nuclear fleet. The increase in nuclear output of 2.3 terawatt hours enabled additional volumes to be sold on the market in the context of rising prices, whereas the level of generation in ’21 has led to purchases at high prices.
The EBITDA of Italy improved organically by 14% and at €0.6 billion, primarily led by the electricity and gas activities. The EBITDA of EDF Renewables increased organically by a strong 65%. The growth was mainly due to the increase of 22.7% in the generated volumes versus H1 ’21 and to positive price effects. The first half of ’21 was impacted by the extreme cold snap in Texas with a material adverse impact on generation EBITDA estimated at minus €94 million with no equivalent in ’22.
Other activities more than doubled to €1.8 billion, driven by EDF Trading’s EBITDA, which was up sharply compared to H1 ’21. It reached more than €1.7 billion. This trading and optimization performance was achieved across all geographies and the backdrop of very volatile commodity markets.
This slide now presents another summary view of the variation of group EBITDA. A positive price effect in France of €3.9 billion on regulated and market offers before regulatory measures. The negative impact of the regulatory measures in France for minus €6.2 billion, including a provision of €2.7 billion for the ARENH volumes to be delivered to alternative suppliers in the second half of the year. A negative impact of the drop in nuclear output in France for minus €7.3 billion. The decrease in hydronic generation for minus €1.4 billion. An improvement of the other renewable generation by €0.2 billion. The exceptional performance of EDF Trading, which contributed positively for plus €1.1 billion. And last, other operational effects for a total of plus €1.6 billion including a positive impact of sales and purchases in the markets, increased nuclear output in the U.K. and unfavorable downstream impact in the U.K. and Italy.
Let’s now move to the other items of the P&L. EBIT was down by €8.8 billion from €4.3 billion to minus €4.5 billion. This variation is mainly explained by the decrease of the EBITDA from minus €7.9 billion.
Net income group share amounted to minus €5.3 billion, a negative €9.5 billion variation versus H1 ’21. As detailed previously, EBIT decreased by minus €8.8 billion. The financial result amounted to minus €2.9 billion, down minus €3.8 billion compared to the first half of ’21. This change is mainly explained by; first, minus €5.1 billion due to a lower performance of the dedicated assets portfolio in the context of a bearish sub market, minus 8.9% in H1 ’22 versus plus 6.9% in H1 ’21; second, a favorable discount effect of plus €1.5 billion, mainly due to the increase in the real discount rate for nuclear provisions in France of 30 bps between December ’21 and June ’22, after a stable trend over H1 ’21; third, overall, the average ratio — coverage ratio of the dedicated assets stood at 105.3% at the end of June ’22 compared to 109.3% at the end of ’21.
Income tax followed the evolution of the EBIT and the financial results with a swing from minus €1.5 billion in H1 ’21 to plus €1.8 billion in H1 ’22 with the recognition of deferred tax assets.
This slide shows the main elements from net income group share to net recurring income. The main element explaining the €4.4 billion increase in the nonrecurring items net of tax, is the fair value adjustment of the dedicated assets net of tax for plus €3.8 billion. The group’s net income, excluding nonrecurring items, stood at minus €1.3 billion in H1 ’22 versus €3.7 billion in H1 ’21.
Let’s now highlight the main elements explaining the evolution of the net financial debt in H1 ’22. Group cash flow was negative for minus €4 billion. It mainly results from the deterioration of the cash EBITDA. Working capital requirements represented a positive plus €6.8 billion, which is mainly explained by a reversal of the working capital requirements on the trading activities compared to end ’21 and by cash in on the CSPE mechanism, the purchases obligation of renewable producers in the context of very high prices on the spot market.
Net investments amounted to €8.5 billion, an increase of €4.8 billion compared to H1 ’21 especially related to the acquisition in ’22 of the development rights for offshore wind power in the New York Bight. The rights issue of last April contributed positively for €3.1 billion. As a result, the net financial debt decreased slightly to €42.8 billion at the end of June ’22 versus €43 billion at the end of ’21.
To summarize my key messages of this semester, activity was good for most of the segments, but the fall of nuclear output in France in the context of very high market prices alongside exceptional regulatory measures led to a major drop in EBITDA. The proceeds from the recent rights issue and a very favorable working capital requirement movement helped maintain the level of debt at an even level.
This ends my presentation. Let’s now hand it back again to Jean-Bernard Levy.
Jean-Bernard Levy
Yes, thank you very much, Xavier. Some perspectives for the year. Current one ’22 has been marked by several events that have had a significant impact on our finances as you have seen. Therefore, we must draw your attention to the EBITDA for 2022, starting from a 2021 base of €18 billion. We should expect approximately €8 billion in positive effects on energy prices compared to what we had estimated back in February, which was €6 billion. Today, we estimate at €8 billion. Then approximately €10 billion of less EBITDA due to exceptional regulatory measures and €24 billion EBITDA less due to the impact of declining nuclear production in France compared to the previous forecast mid-May, which was €18.5 billion. Today, it’s €24 billion. And of course, these estimates are linked to the increase in feed-in tariffs. And they are calculated based on the market prices as they were of July 13, 2022.
On the next slide, you will see that regarding 2023, we stand by our ambitions. We are aiming at the net financial debt-to-EBITDA of around or slightly above 3. And an adjusted economic debt-to-EBITDA ratio at around 5. As you know, the French government’s announcement of its intention to hold 100% of EDF’s capital, it will open up a new chapter for our group. In that way, the French state renews its commitment and will allow EDF to find the right solutions to grow our business sustainably in France and abroad, and in particular, regarding new nuclear projects and the development of renewable energy.
Thank you very much. This ends Xavier and my initial presentation, and we now will turn to a Q&A session. Please, for your questions.
Question-and-Answer Session
Operator
[Operator Instructions] We have got the first question from Arthur Sitbon, Morgan Stanley.
Arthur Sitbon
The first one is on the press release from the ASN, the French Nuclear Safety body yesterday. I think that your strategy regarding the stress corrosion phenomenon is appropriate, and also making a comment on the Belleville 2 reactor. I was wondering if this could impact your nuclear output targets for 2022, 2023. But also doing the checks by 2025, I thought was giving you a bit more time than you initially thought. So I was wondering also if it impacts output in 2024 and 2025.
My second question is on the coverage ratio on nuclear provision. I was wondering if you see a risk of it of the ratio dropping below 100% and EDF having to make further contribution to the dedicated assets.
And my last question is actually that we are seeing targets in France and in other European countries to cut the consumption of electricity and gas for the next few years. I was wondering how as a group you can help with that. And if you think the objectives being set are achievable and at which cost to utilities and consumers?
Jean-Bernard Levy
I will answer your first and third questions. I will leave the second one to Xavier. The ASN press release confirms what we have proposed. So what’s appropriate, I think is a good description of what we would have expected as a green light to move ahead as we had proposed. So this means it is in line with our previous and recent targets for nuclear generation in 2022 between 280 and 300 terawatt hours in 2023, between 300 and 330 terawatt hours, so there is no change.
And if we bring forward for just 1 of our 56 reactors, which is in Belleville, if we bring forward one of the maintenance period that we had in mind, it falls well within the range of these numbers because, as you know, it’s not a single number. It’s a range. And so this does not have any impact on the range. So we keep the 280 to 300 for ’22, the 300 to 330 for ’23. And we would, of course, comply with the request to bring forward 1 of the Belleville reactor maintenance. And we are looking into it in more details and we will publish the new period for maintenance when we are ready, which is, I guess, in a few days.
On the third question regarding consumption of energy, I think the first we have to say is that we feel at the heart of these assets in Europe in general and in the European countries where we are present, which is France, Italy, Belgium, mostly. And I would like to add the U.K., although it is not technically within the European Union. I think European consumers today can have a very comfortable life but save a bit of energy, generally speaking. They can save a bit of energy by the way they consume it. They can also use less fossil energy and use more low-carbon entity such as nuclear, renewables, hydro and so on. So I think electricity, the switch towards electricity has started and we’ll move on. As we see, for instance, heat pumps, electric vehicles being more and more in use in other countries where we operate.
And then as EDF, of course, first, we have to make sure that ourselves we are exemplary that we give our own energy resource management the right pressure in order that we do work certainly much better than the average company that our own employees are minded about their own personal consumption. So we try to do so in various ways. And of course, as always, we will help our consumers, our corporate consumers with giving them some advice, dedicated advice, tailor-made advice in order for these corporate consumers to improve their energy consumption and to reduce their bills.
And with our domestic, our mainstream consumers, we have lots of tools. We have, of course, people talking to them over the phone. We have Internet sites. And even more importantly, we give them digital tools, algorithms in order for them to understand where they stand regarding the electricity consumption and how they can improve it.
And to give you, I think, quite a remarkable example, and the number I will say — I will quote, the number has been checked by an independent audit company. Those customers who come often to our site to check on their consumption and use our algorithm to advise them in the energy consumption. It is proven that they save, in average, 12% on their bills.
So yes, consumption, reduction of — consumption optimization and reduction of demand is at the heart of what we want to achieve for the next period and of course, even further.
Now the second question, maybe, Xavier.
Xavier Girre
Yes. So as regards the coverage ratio for nuclear liabilities, it’s as I highlighted at the end of June this year, our coverage ratio is above 105%. These days, it’s even a bit higher than that. And of course, we follow it very, very carefully. It’s important just to keep in mind that if this ratio were to go below 100%, we may get 5 years to inject additional assets in order to improve this coverage ratio. This is by regulation. So we may have 5 years to inject additional assets. But clearly, today, our coverage ratio is strong, being significantly higher than 105%.
Operator
Our next question is from Vincent Ayral, JPMorgan.
Vincent Ayral
One of our last sets of results, you’ll be nationalized, so I’ll offer big picture questions here focused on the numbers. The first one will be talking about the present and nationalization process. It’s been voted in the Lower House, the Parliament. Could you give us an update on the process, the timeline and the risk of delays? I’m thinking more things about the minority shareholder association, ADAM, which asked for more. And basically, is there a threshold in terms of voting rights for their request to be considered and could that mean some risk of delay indeed on the process? So would be interested in understanding the dynamics around that.
The second question regarding the future. So we’re nationalizing first, but we will ask to reregulate later, if it’s facing a number of challenges. Clearly, we have the outages in the short term. But the other challenge is the one of the regulation. And how do we finance the future nuclear fleet? What about the market design in Europe? So how do you see this developing over the coming years for EDF? What are the key challenges?
Jean-Bernard Levy
So to summarize, if I understood well, your first question is on the process of the buyout of the minorities and the second one is more about how we see our challenges and especially the one regarding regulation and market design, not only for EDF, but in Europe. So I will take the 2 questions.
On the time line of the process, obviously, in order for the process to move ahead, there is a need for the state to have the money to buyout the minorities. And as you said, right now, there is a legislation in front of our parliament. So it goes to the first national assembly, then to the Senate, then it goes to the full law. As you may have noted, a couple of days ago, the first step was that the National Assembly did vote in favor of opening a new line within the government’s books in order for the €9.7 billion to be available to Mr. Lemaire at Ministry of Finance, to pay for the minorities and convertible bonds buyout. But it hasn’t yet gone to the Senate and then it got to be a full legislation.
So this is the first step. So let’s assume that this legislation is implemented sometime in the next few weeks. And then the state will have to go to the French Financial Markets Authority, AMF in the French acronym, and we’ll have to go to AMF with a proposal for the buyout to €12, then the ball will be in the camp. So right now, the ball is in the camp of parliament. Then the ball is in the camp of the government, then the ball goes to EDF. And EDF building on the advice of its ad hoc committee and on a Board decision, we’ll have to respond to the initiative that is being taken by the state and make its own comments on the price.
So the independent expert that was designated yesterday, will fuel the ad hoc committee. The ad hoc committee will make a recommendation to the full Board. And then the full Board will give AMF its response to the proposal at €12 made by the state. So that is the third step. I would say the ball is in the camp of EDF. And the fourth step is the ball is in the camp of AMF, of the Financial Markets Authority. At this fourth step, AMF, the services and the colleagues, the people leading the AMF, they have to decide whether this is an appropriate buyout proposal by the state with the support of the advice that they will have received from EDF. And this is the fourth step.
And then if AMF does consider that the buyout process and the numbers and so on, at all, this is consistent, they will open a tender offer for all the minorities to bring their shares against €12 for each share. So this is where we stand 4 steps. Parliament, where we are today. State, to go to AMF to propose. AMF, to request advice from the company. And then back to AMF to state on to make a statement, to make a decision on the takeover proposal. And then open — if AMF decision is positive, open the tender offer period. So this leads us to some time in the fall and I am not going to make any comment on detailed timeline because it’s complicated and things day by day is probably not very interesting.
On market design and regulation, I understand your question is, of course, related to a period of time where maybe there will be less discussions between us at EDF and the financial community and not, of course, our friends that lend money to us. But our friends that are shareholders or work sort of in the name of our shareholders like you, the analysts. And yes, we do indeed hope that the current situation, which is unbelievably volatile with unbelievably high prices and day after day changes in these prices will show the regulators that the market that was designed may be worked. Did it work well? Did it work poorly? Maybe it sort of worked during normal years, normal periods. But with the war in the Ukraine, supply chain issues, inflation and so on, I think there is no doubt that the market design needs a good chunk of repairs or maybe a total reshuffle.
A total reshuffle will create problems because I think people have been used now for many years that energy products, commodity products, electricity products can be traded between various players that do generate or do need physically these products on the market, but also a large community of financial actors. And that there is probably indeed is an interesting case for optimization through the markets and for short-term optimization through the market, where of course, physically, the last generation tool, which is used is compliant with the price that you can see on the short-term on the spot price on the market.
But when you think about the market design that has led to this situation where for Q2 2023 or Q1 2023, prices are close to €1,000 per megawatt hours and with swings of tens and tens of megawatt hours every day. Where you can see that in case of shortage, there is from time to time, a need for some very short-term trades almost immediate trades to be performed at GBP 10,000. I think it was GBP 10,000 that were traded between Belgium and the U.K. a few days ago in order for the U.K. system not to collapse. And whereas the normal price was in the GBP 50 range. And so you talk about GBP 900, you talk about GBP 3,000, you talk about GBP 10,000, whereas the price was GBP 50 or maybe GBP 60 or maybe GBP 80. It does prove that the market design has not met its objectives in cases of crisis like the one we’ve seen for the last few months.
So I do believe that in some point in time, and we hope that the European Commission will be a bit more active, a bit more responsive, a bit more agile, that there will be a need for significant change in that market design, which obviously — well, one may wonder whether it does work well or not in normal times, in normal circumstances. But obviously, in the current circumstances, and it’s been going on like this for months and months, it doesn’t work. So it needs a significant reform, and we do hope that the member states and the commission will be able to implement that in a reasonable time frame.
And I have to say that my own discussions that I’m having both as Chairman and CEO at EDF and also as the President of Eurelectric, the Association of 27 countries electricity generators and distributor, I think these conversations do not lead in the depth of my heart. I am not very optimistic that right now, we will have soon a strong reform, a deep reform in front of us. I believe right now, there is a lot of hesitation, and I don’t think that’s good for anybody. So that’s my view on your question.
Operator
We’ve got a question from Sam Arie, UBS.
Sam Arie
I have a couple of different questions, if that’s okay. The first is on the — I think it’s Slide 28, is that right with the full year —
Jean-Bernard Levy
Sorry, we all are wondering what you’re exactly talking about. Can you please repeat? I’m really sorry for this.
Operator
[Operator Instructions]
Sam Arie
Can you here me now?
Jean-Bernard Levy
Yes, please. Can you be please speak slowly?
Sam Arie
And I’ve a couple of different questions. One is on the slide where you give us your EBITDA bridge for the end of the year. And I just wanted to check, as far as it looks to me like the midpoint of that would be an EBITDA loss of around maybe €4 billion or €5 billion factoring in the July 13 prices, I think you said. So just to raise a question. And maybe this is for Xavier. If you could comment, is that about right for full year expectation? And then talk a little bit about how you are landing on a sort of positive EBITDA for the first half, but then still expecting this big swing to the negative? And I suppose that comes back to a question of how far you are into the buybacks that you need to do this year? So that’s a financial question.
And I suppose related to that, then I can’t help asking but with all these pressures in the second half and the risk on prices that you mentioned, then of course, there’s the EBITDA bridge has been getting worse every time we look at it, could get worth again. If for any reason, the state offer did not go ahead. You talked about various steps it has to go through. But I’m interested in your commentary on how you feel about the position of the company if it was not effectively nationalized in the autumn? And what kind of measures you would have to think about to get through this very difficult winter that’s in front of us? That’s my big question.
And if there’s time and if you forgive me, I’d also, Jean-Bernard, be very interested to hear your thoughts about the U.K. market. We’ve obviously got an election process going on for a new Prime Minister. And as soon as that new Prime Minister takes office, they’re going to be confronted with a tariff cap update that looks to have gone up by nearly another GBP 1,000, which offsets all of the remedy measures offered so far and even some of the measures that we just announced and not offered. So I’m just wondering what you think might happen in the U.K. market to address this rising household bills and where we might end up if we think windfall tax for power generators comes back, if you think there are other changes. I mean it’s a huge question for the sector, and we’d love to hear your thoughts.
Jean-Bernard Levy
Thank you. Xavier will answer your first two questions. I will try to give you my five cents on the last one.
Xavier Girre
First, as regards to ’22 EBITDA, we expect the half — the second half of this year to deliver a weaker EBITDA than the first half. Why is that? Because we still have to buy back volumes in order to compensate the lack of nuclear generation in France. And in the context of the current prices, this gives this very significant minus €24 billion estimated on the basis of the prices of the 13th of July, negative impact for the full year ’22 EBITDA. So you’re right, the second half is expected to be significantly lower than the first half of the year.
As regards to your second question, what’s key to me are to be in a position to finance the necessary investments in order to enable EDF to be clearly a key contributor to the energy transition. And that’s why we are paying the highest attention to our rating. That’s why we have set an action plan, including the rights issue that we organized in April. And that’s why we have constantly set up a very forward-looking financing policy of the group. So we have, as you know, organized term loans for more than €10 billion in April. And we intend, of course, to refinance the group, including with senior bonds and with hybrids in the future because it’s absolutely key and hybrids are also core to our financing strategy in the long term.
And Jean-Bernard, the third question is for you.
Jean-Bernard Levy
Yes, I think the situation in all these countries where energy prices for the domestic users, for households has been growing a lot, is creating for governments, and I’m not specifically talking about the British government, especially at a period where I understand that there is an election coming up for the new leadership of the parties. So this is just a general view. I think right now, the burden, the weight of energy bills on the people with the lowest revenues does create a problem and we have seen in many countries that a way to manage that is to let the prices reflect on household bills, but to offset, to compensate, to give subsidies to those people for which it becomes an unbearable situation because the low revenues cannot all of a sudden be switched to — a strong part of their low revenues cannot all of a sudden be switched to pay for energy, even if they are encouraged to save. But the savings they can achieve are below the additional bill they have in front of them.
And so we have seen the government comes with checks in order to help out with these populations. I believe that this is maybe not very orthodox ways to run the economy. But in these circumstances, I believe it is a proper way to deal with a difficult situation due to the shortage and the price of primary energy. So we do see in several countries that governments are using a way to offset the very critical situation of some households by giving subsidies, state subsidies to maybe 20%, 30% of the households or maybe a bit more.
So this is just a general comment I was happy to make. And of course, at EDF, generally speaking, we are helping out with those people who have low revenues. And we are very proud that this year, we have implemented something which — we have a question is, why didn’t we do it earlier? But we are very proud that this year, we have implemented a solution where all year long and not only during the winter period, but all year long, the people that don’t pay their bills, we keep 1 kilowatt of available power for them to lead a decent life with maybe, of course, less access to electricity than if they have paid their bill, but not with no access at all to electricity. With 1 kilowatt, you can do a few things, and we are proud that in France, all our clients, irrespective of what is the cash balance with us, they do get the 1 kilowatt to lead a minimum comfortable life.
Jean-Bernard Levy
So that’s it. I believe that’s the end of the time that we had scheduled 9:30 here in Paris. And I want to thank everybody for attending and following so closely EDF’s situation. And wish you in the name of Xavier, myself and all the team that is working day after day with the financial community following EDF, we want to thank you very much for all your dedicated work. And we’ve had with you with a very hectic year, let’s be clear, a lot of interaction. And I want to thank you for being so motivated and so professional in analyzing what we do. Thanks again. A good day to everybody.
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