Electricite de France SA

PAR:EDF

Earnings Call Transcript 2021-Q3

[Xavier Girre]

Good morning, everybody. I am pleased to welcome you to this conference call. I will present you the end of September 2021 sales, starting with the key figures and the main highlights. As usual, I will leave as much time as possible for the Q&A session. And this call is expected to end at 9:45 Paris time. On Slide 4, sales amounted to circa EUR 57.1 billion at the end of September '21, up by 15.7% organically compared to the same period in '20. The main positive drivers, which have a direct impact on the margin, were first, higher nuclear output in France which increased by 27 terawatt hours to reach 268.2 terawatt hours at the end of September '21. This is mainly due to lower modulation due to both climate and demand and to better availability of the fleet. The overall effect is estimated at plus EUR 1.4 billion. Second, the TURPE indexation and higher capacity prices in France estimated at plus EUR 0.8 billion. Other effects contributed positively to the sales increase, but with limited margin impacts. First, the significant rise in gas prices and additional volumes sold estimated at EUR 2.8 billion. Second, electricity from purchase obligations in France sold this year at much higher spot power prices versus a year ago, which accounted for an estimated plus EUR 1.1 billion. In a nutshell, the performance of the group was strong for the first 9 months of '21, in line with the half year results presented in July. Let me now update you on some highlights of the period. Starting with nuclear, EDF will have a major role to play in the 2 plants recently launched by the French government, France 2030, which is dedicated -- which is dedicating France to innovation in the nuclear industry, including small module reactors and waste management and France Relance which with an investment fund dedicated to the French nuclear industry subscribed by -- at 50-50 by EDF and the French state, targeting a total of EUR 200 million by 2023. As for new nuclear, first, the break preclusion approach for the EPR 2 reactor project has been considered as acceptable by ASN. Safety standards are now stabilized and shared with the ASN; second, as for Flamanville 3, the ASN indicated that it had no objection with the solution proposed by EDF to repair the 3 nozzles on the main primary circuit; three, in the United Kingdom, the British government has introduced a new legislation in October to establish a funding scheme based on the RAB mechanism for new nuclear projects. It has also budgeted direct funding of up to GBP 1.7 billion to enable a large-scale nuclear project to reach a final investment decision. Both announcements are obviously very favorable to the Sizewell C project, the U.K. government being in active negotiations with EDF on this project. As for existing nuclear, the fourth 10-year inspections of the 900-megawatt units within the Grand Carenage program are ongoing with 4 already completed and 3 underway. As for renewables, EDF pursued its development in all activities. The PPA was signed for 277-megawatt solar project in California, coupled with a 600-megawatt hour battery energy storage system. Five projects for a total of 735 megawatts, combining wind, solar and battery storage were awarded to the group in South Africa. At end September 2021, 8.4 gigawatt gross were under construction, a 6% increase compared to the end of 2020 and 1.5 gigawatt was commissioned, representing more than double the capacity compared to the same period last year. Let's now move to customers and services. The number of electricity residential customers at market offers was close to 1.3 million at the end of September, a 30% increase versus end 2020. The number of gas customers close to 1.8 million increased by circa 5% over the last 9 months. As for Dalkia, it provided an innovative solution to the SNCF, the French Railways, to monitor the operating and maintenance of 122 stations. On Enedis, the Linky smart meter program is close to completion, expected as scheduled for year-end, 33.7 million meters installed to date. The number of new connections realized over the first 9 months of the year was increased by 20% compared to the same period in 2020. The group also continues its innovation path. Regarding hydrogen, Hynamics, a 100% subsidiary of the group, inaugurated its first hydrogen generation and disruption station in Auxerre and signed a strategic partnership with a French cement group to decarbonize its manufacturing sites via total electrolysis capacity of 330 megawatts. Furthermore, EDF participated in the setup of the largest investment fund dedicated to low-carbon hydrogen. As for electric mobility, Pod Point confirmed its strong performance, doubling its sales over the first 9 months in 2021 compared to the same period in 2020. It rolled out and is managing 140,000 charging points at the end of September, an increase by 47% versus end 2020. As you might have seen, Pod Point completed its IPO last week and trading started on the 4th of November. This means that it successfully raised the targeted capital of GBP 120 million in order to continue to fuel its growth and development and maintain its leadership in the fast-moving U.K. EV charging segment. And post IPO, EDF retains more than 50% in Pod Point. At group level, more than 160,000 charging points were rolled out and managed at the end of September. As regards Izivia, the leader of public charging in France, it showed strong growth, doubling its sales versus the same period last year. If I move to international, EDF completed the financing of an innovative project combining solar and gas in Chile, which is based on a 480-megawatt solar plant, the largest to date in this country. As for the group's disposal program, the target of EUR 3 billion impact on economic debt over the period 2022 is very likely to be exceeded by the end of the year, 1 year ahead of plan. Let me remind you that we recently completed the disposals of CENG in the U.S. and of West Burton B in the U.K. and Edison granted exclusivity for the sell-down of up to 49% and of its renewable platform and expect to close the deal before the end of the year. If we move now to our ESG achievements. EDF has further improved its nonfinancial ratings at a very high level. It won the platinum medal by EcoVadis awarded to the top 1% only, and Vigeo ranked EDF #3 out of 63 utilities. It was ranked first on social indicators and second on Just Transition on the list established by the World Benchmarking Alliance in partnership with CDP and ACT. EDF also published its statement and just transitioned a couple of weeks ago, ahead of the COP26. Last, Moody's revised the outlook for EDF's long-term credit rating from Negative to Stable. It reaffirmed the A3 rating. Let's now look at the change in sales into more details. It was positive for almost all segments. Let's start with France generation and supply activities. The sales increased by EUR 2.8 billion organically, a 13.8% growth. As already detailed, it was mainly due to favorable energy volume effect with an increase in nuclear output of 27 terawatt hours despite the closure of the Phase 1 reactors in 2020. Price effects contributed favorably for an estimated EUR 0.1 billion. Sales were made at higher prices than in 2020 for EUR 1.2 billion, but were almost entirely offset for minus EUR 1.2 billion by purchases also made in the context of rising prices. Downstream was up EUR 0.2 billion. The increase of reinvoiced capacity price more than compensated the negative erosion of sales to end customers, which was estimated at minus 9.7 terawatt hours. Last element, the resale of purchase obligations, which I have already detailed. Sales of regulated activities increased by EUR 1.1 billion, plus 9.4% variation. First, on Enedis. TURPE 5 and TURPE 6 indexations had a positive effect for EUR 0.3 billion. Weather conditions closer to normal contributed for plus EUR 0.3 billion. Sales also benefited from a strong increase in network connections for an estimated EUR 0.2 billion. For your information, a total of 500,000 renewable producers were connected to the grid at the end of September. In addition, price effects mostly linked to the evolution of the portfolio structure had a favorable impact for an estimated EUR 0.1 billion. As regards Electricité de France and Island activities, they contributed positively for circa EUR 0.2 billion. Let's now look at the other segments. The sale of EDF Renewables increased by EUR 0.1 billion, a 7.2% organic growth. Electricity output amounted to 12.5 terawatt hours at end September, a 10.9% increase, driven by the commissioning of newer capacities. It benefited also from the growth in the distributed solar activity in the U.S.A. as well as higher O&M activity in the U.S.A. and Europe with limited margin. As for group renewables, 8.4 gigawatt gross projects were under construction at end September, a new record level. Dalkia sales increased by EUR 0.4 billion, plus 13.2%, mainly due to the recovery of the services and works activities after 2020 affected by the pandemic in the first half of the year. It was also linked to the sharp rise in gas prices with limited impact on the margin and to normal weather conditions in '21 compared to mild weather in '20. The sales of Framatome were up by EUR 0.2 billion or plus 3.9% in organic terms, mostly linked to the recovery post-COVID and improved sales for the installed base business, in particular in the U.S.A. As for the United Kingdom, sales were down by EUR 0.1 billion or 1.3% in organic terms. Nuclear output was down by 2.1 terawatt hours to 30.5 terawatt hours due to a heavy outage program and to the extension of some outages. Additional output for Hunterston B and Hinkley Point B was more than offset by outages of Sizewell B, Dungeness, Heysham and Hartlepool 2. The decrease in sales was mainly due to lower realized nuclear prices by minus GBP 11.5 per megawatt hours compared to the same period of last year due to power buyback in very high market price environment. The supply activity benefited from the increase in demand post-COVID of professional and industrial customers around plus 5% in the context of rising prices. The growth in volumes sold to residential customers whose impact on EBITDA is limited is mainly explained by the takeover of the customer portfolio in January, Green Network Energy, reposting 670,000 customer accounts and by colder weather. The impact here was also estimated at plus EUR 0.3 billion. As you know, the current situation of high power prices has been very challenging for suppliers in the U.K. It has caused the failure of some 21 energy suppliers, mostly smaller firms affecting about 2 million customers. The current cap regulated tariff does not integrate the recent rise in wholesale prices yet and is, therefore, more competitive than fixed market offers. Many residential customers have switched to this tariff, which drove their suppliers to buy back positions at very high prices and let some of them to go bust. The supplier of last resort mechanism managed by Ofgem, requests the remaining suppliers to take over the customers' portfolios. EDF Energy recently took over the 430,000 customer accounts of utility point under this mechanism. This move is obviously an opportunity for EDF Energy to consolidate and grow its supply business. Sales in Italy increased by EUR 2.3 billion, a 55% growth. It mainly reflected the strong increase in gas market prices with limited margin impact. It has also benefited from a favorable sales trend in the electricity business, thanks to positive price effect to the good performance of service systems and to an increase in renewable output. The supply activity benefited from the recovery of activities post-COVID for professional customers in the context of rising prices. The colder weather in '21 contributed to the evolution of the turnover, in particular for the residential customer segment. As you might have seen, Edison upgraded last week its 2021 EBITDA guidance to a range of EUR 830 million to EUR 890 million in light of the strong business performance and certain one-off effects recorded in the period. The other international sales increased by EUR 0.3 billion, 18.1% increase. In Belgium, gas volumes sold to residential customers increased due to colder weather in '21. Volumes of gas and power sold to industrial customers and service systems also increased. Wind power development continues with a net installed capacity of 572 megawatts at the end of September '21. As for Brazil, sales increased by EUR 0.1 billion mainly due to the 25% revaluation of the power purchase agreement price in November '20 in connection with the indexation to the gas price. As regards the last block, the sales of the other activities increased by EUR 1.1 billion, a 67.7% increase. Sales from gas activities increased in the context of very favorable gas prices in the wholesale market. However, these effects have a limited impact on the margin. EDF Trading sales benefited from the very high volatility in all commodity markets. Market conditions have indeed been and continue to be extremely volatile. Some geographies experienced unprecedented turbulences over a very short period of time end September and early October. A few desks at EDF Trading suffered from this volatility. However, it is worth noting that the trading margin as of end September and as of end October 2021, which translates in revenue at group level is above its budget and 2020 level for the same period of time. This slide presents another view of the positive change in sales, focusing on the main effects, favorable price impact for EUR 4.6 billion. This was mainly due to a positive gas price effect for EUR 2.2 billion, the resale of electricity from purchase obligations at higher prices for EUR 1.1 billion, the capacity reinvoiced at a higher price for EUR 0.3 billion and other price effects, including TURPE indexation and power price effects for EUR 1 billion. It's also due to the volumes, which contributed positively for EUR 2 billion, mainly from higher nuclear output in France. It's also due to sales of EDF Trading increased by EUR 0.4 billion. Last, other operating impact represented a positive EUR 1.1 billion. Let's now move to the last slide showing EDF '21 guidance and '22 ambitions. We confirm all elements already announced. For 2021, an EBITDA target higher than EUR 17.7 billion, and the net financial debt-to-EBITDA ratio of less than 2.8x. And I am very confident that the group will meet these targets. For '22, no change. As regards the disposal plan of approximately EUR 3 billion impact on economic debt over the period '20 to '22, it's once more very likely that it will be exceeded by end '21. At the end of September, signed or closed disposals had an impact on EDF Group's adjusted economic debt of approximately EUR 2.7 billion or EUR 2 billion on net financial debt and Edison entered a few days ago in exclusive negotiations about the sale of 14% of its renewable portfolio. This transaction is expected to be closed at the end of the year. This is a capital recycling transaction of Edison Renewable Italian platform of 1-gigawatt onshore wind and 100-megawatt solar. The aim is to continue the development of our renewable presence in Italy with a new financial partner on board. This ends my presentation for end of September 2021 phase and highlights. And I now open the floor to your questions.

[Operator]

[Operator Instructions] We have the first question from Vincent Ayral from JPMorgan.

[Vincent Jean Michel Ayral, Analyst]

I'll have a few questions there on nuclear. The first one is regarding tariffs. We've been having an intervention from the government saying that the maximum tariff -- that maximum bill increase will be 4% of the tax offset, and that corresponded to 12% tariff increase on January 1 for EDF, so 8% offset, thanks to lower taxes provided by the government. And this estimate was given by the Prime Minister Castex at the end of September. So I suspect this was based on the commodity price assumptions in mid-September. So what would be your estimates of the tariff increase formula if the power prices were to stay where they currently are, I'd say, I don't know, EUR 125 in I would ask something like that through the whole of December. So that's question number 1 is the latest update on what could be a tariff increase of today using the formula. Second, Taxonomy, [indiscernible], we said that there would be an inclusion of nuclear and picking to expand. Potentially, this is basically before the German coalition is starting and before Macron takes the presidency of the European Union on January 1. So what is the actual time line? Have you seen anything like that on Taxonomy? What are your expectations? And finally, on the nuclear new build regulation. We see a lot of support, Macron yesterday said that France will go back to building new nuclear reactors first time in decades. He didn't say how many, what technology. We expected about 6 new EPRs to be announced. We did not get details. Could you resume here the case? What do you know about that? Has there been a bit more detail somewhere? We would have missed it. And will you invest in new nuclear without regulated framework for new build? I think that's quite key. And then Bruno Le Maire has pushed again at the commission yesterday for a new market design, looking at potentially long-term contract for low CO2 generation assets. That could be seen as being a key to fixed plus for nuclear, if it was to be applied to EDF existing fleet. So Northern Europe seems to be reluctant. How do you see this evolving in near to medium term?

[Xavier Girre]

Thank you, Vincent, for all your questions. First, as regards '22 bill and tariff and prices increase. So the first point as regards '22 is the fact that the current price markets will have a positive impact. No doubt about that. Nevertheless, it's important to keep in mind that current markets are very volatile. There are still a lot of uncertainties such as the upcoming rent auction of November and market prices in December. And definitely, the rent auction will determine the level of the cropping effect. Of course, both the volumes requested at the rent auction and the '22 forward prices in December will have a very significant effect on '22 tariff increase. So this is why even if we definitely consider that the current level of power market prices could represent a very significant positive contribution to the EBITDA in '22 compared to '21, we remain quite cautious for '22, given the current context and the high volatility and the uncertainty that I already highlighted. As regards the bill trend for February '22, you referred to the decision that has been announced by the Prime Minister end of September. And Prime Minister announced a cap of 4%, including VAT of the increase of the regulated tariff financed by the reduction of the domestic tax and final consumption of electricity. And this will not have any impact on EDF resources, because it's -- the target of that is to cut the bill as you very precisely highlighted and not the resources of EDF. And the regulated tariff increase proposal is expected to be issued by the French regulator, the CRE, in February '22. As regards the announcement that have been made yesterday night by the French President. President Macron announced yesterday that the construction of nuclear reactors in France would be restarted. And this decision is motivated by the achievement of carbon neutrality in 2050 and is aiming at guaranteeing France's electricity supply. This announcement is obviously a good news for EDF and for the whole French nuclear industry, which are preparing for it. And EDF presented a few days ago on Monday, last Monday, the second progress report of the Excell plan, which was launched in May 2020 and this plan, as you know, aims at enabling the French nuclear sector to attain the highest levels of rigor, quality, excellence in order to succeed in nuclear projects. So we are now expecting more details by the French government on this announcement. And as regards the funding scheme of potential future EPR, there are currently some work that are being currently ongoing -- that are currently ongoing and discussions between EDF and the French authorities about that. As regards the Taxonomy, which is, of course, also a very significant question. The first delegated act setting out the list and criteria of activities that make a substantial contribution to 1 of the 2 climate objectives was adopted by the commission, as you know, in April '21. And after examination by the European Parliament and the Council, it should be published by the end of the year. And the delegated act of April '21 classified hydropower as a sustainable activity. As regards to nuclear specifically, nuclear today is neither excluded nor included in the Taxonomy as you know. It was subject to several scientific assessments, which concluded that nuclear energy does not violate the do-not-significant-harm principle. And on the 21st of October, Brussels said it would take more time before making a decision on the integration of nuclear energy in the Taxonomy, but the objective is still to propose rules by the end of the year to an additional dedicated act. And as regards the new market design, I mean, as we all see, although France has very decarbonized assets, the electricity prices are determined by the last production asset called to produce power. And with the ongoing phaseout of coal and the introduction of the European carbon market, this price is linked to both the price of gas and CO2. And this price rightly is a source of concern about the economic and social consequences of the current volatility. The situation would make us think about how to integrate the long term into energy markets and also highlights the extent to which, in the long term, Europe must succeed in moving away from dependence on fossil fuels and how nuclear power and renewables will be major assets in achieving carbon neutrality by 2050. And finally, I think we can also question the link with the gas -- with the price of gas, which does not reflect the cost of our decarbonized production made in France. And in any case, such reflections and changes require in-depth discussions at the European level. These are the answers I can give to your 5 questions mentioned. Other questions?

[Operator]

We have the next question from Sam Arie from UBS.

[Samuel James Hugo Arie, Managing Director and Research Analyst]

Xavier, I just wanted to ask a question about next year. And I know, of course, you're not guiding next year today. So it's just a kind of background question to help us as we think about it. I'm picking up on your comments just now that there's still a lot of uncertainty, and we need to be careful about what assumptions we make. But if I look at some consensus EBITDA for next year, it's around about EUR 21 billion. And if I look at our own estimates, they're in a similar place. And I think the way that we're all getting there is just looking at the power prices, the -- what's been said about the tariff pass-through next year, looking at the ARENH auctions and making estimates about the cropping and so on. And even relatively conservative assumptions give you a good EUR 3-plus billion upside on your guidance for this year -- sorry, I mean, next year. So my question is, can you just help us think, I suppose, firstly, is there anything else negative that we should have in mind when we're thinking about next year that would offset some of these potential kind of almost mathematic price upsides? And secondly, if you did find yourself in a situation after the ARENH auction and the cropping adjustments and so on, where you had quite a large upside for 2022, but which wouldn't sort of follow through into future years in the same way. Would we -- should we expect you to kind of smooth that out by kind of maybe reinvesting some of the earnings in other bits of operating activity that you want to get on with? Or would it -- should we expect it to just flow that through and have a stronger 2022, if that's what the market brings? In general, I think, Xavier, just anything you can -- you feel comfortable sharing about those questions for 2022 would be very helpful to all of us.

[Xavier Girre]

Yes. Thank you for your questions. Maybe 2 points. First, as regards '21, as I said, I mean, we reaffirm our guidance. And I am also quite confident about our ability to reach the consensus for '21. As regards '22, it's very clear that power prices represent a substantial positive effect for '22. So the EBITDA for '22 should grow quite significantly in comparison with '21. However, I just want to remain cautious at this stage due to the high volatility of the market, due also to the fact that considering the high power price level, any unexpected outage would have a very significant impact on EBITDA, both in the U.K. and in France. And for example, any missing terawatt hour would hit the P&L by as much as EUR 90 million to EUR 100 million. So due to these uncertainties, I think it's appropriate to remain cautious at this stage of the year. But nevertheless, you're fully right. The power prices represent a substantial positive effect for '22.

[Samuel James Hugo Arie, Managing Director and Research Analyst]

That's really helpful. And any comment on the sort of second point about if you find yourself looking at a very strong '22, sort of almost as a one-off benefit that year from the cropping adjustment. Would we expect that to flow through? Or would we expect that to be maybe reinvested in some way in other activities that you want to carry out? And therefore, would we expect kind of the development of EBITDA to remain sort of more smooth from '22 through '23, '24, '25?

[Xavier Girre]

I'm not sure I got perfectly well your question, but our strategy is very well set. I mean we intend to continue to develop our activities in low carbon generation, meaning accelerating investments in renewables, investing in nuclear, of course, both life extension and new nuclear activity. We intend to develop our business in service and downstream, to invest also in the distribution network, which is going very well and increasing. And in the current market, which is a positive one with growth in demand and growth in prices, we intend to go on along these lines continuously, consistently with our CAP 2030 strategy. There is no change to expect about that. Definitely, we are very clear on our strategic line.

[Operator]

The next question from Peter Bisztyga from Bank of America.

[Peter Andrew Bisztyga, Head of Pan]

Two questions from me. Firstly, can you give us an update on your experience with cost inflation and supply chain issues both in your renewables business and your new nuclear projects? And then secondly, on the U.K., are you seeing more customers than you expected move on to standard variable tariffs? And could that cause your U.K. retail business to see some negative margin effects this winter?

[Xavier Girre]

Yes. Thank you very much for your questions. First, as regards the inflation impact on our renewable business, you're right, some pressures did materialize on the price of PV modules since December of '20. And the main reason is the increase in the price for silicon. And other factors also did contribute in particular, custom duties applied by some countries, an increase of -- in the cost of shipping. This sudden shock is, in fact, in sharp contrast with the long-term declining trend in the price of PV modules, and it could have some solar projects, PPA had been contracted before locking in the price of modules. And this is mainly happening in the U.S. and India, where we, of course, monitor very closely a number of projects in order to limit the impact on value accretion, such as negotiating the PPA price with clients when possible or optimizing other elements of the projects, for example. And to some extent, the recent increase in the price of steel and aluminum placed a similar shock to the whole industry. Indeed, steel prices account for 10% to 20% of turbine price, which themselves represent 70% of the CapEx for a typical wind project. However, and this is important, of course, the situation is less critical because turbines orders are usually placed earlier in the development cycle of wind projects compared to PV modules. And currently, we have no project where the situation poses a significant stride to our expected profitability. As regards the U.K. situation and in particular, as regards the fact that some of the suppliers in the U.K. market are currently going bust. In fact, this comes from the fact that the third energy prices has caused the failure of '21 suppliers since the beginning of the year, which represents around 2 million domestic customers. In '21, we took over 2 customers portfolio, Green Network Energy in January for circa 360,000 customers and Utility Point in September for circa 220,000 customers, representing a total of 580,000 residential customers. In a nutshell, I mean, there are some additional costs in the short term, which should, however, be recovered over time up to 3 years through the supplier of last resort mechanism managed by Ofgem. And on the long term, this move is, of course, an opportunity for EDF Energy to consolidate and grow its supply business. And to be even more specific, and you referred to that, I mean the question refers to the link between -- or the difference between the cap regulated tariffs, standard variable tariff and the fixed tariff. The cap regulated tariff which is based on the average past 6 months forward prices is updated only twice a year, 1st of October and 1st April. So it means that a specific SVT standard variable tariff, therefore, does not integrate the recent rise in wholesale prices and is more competitive than fixed market offers. And many residential clients have switched from market offers to SVT leaving suppliers in hedged positions. Those suppliers had to buy back dispositions at very high prices and suffered from significant financial losses, which led them to bankruptcy. And in this context, there in the U.K., what's called the supplier of last resort mechanism by which the Ofgem requests the remaining suppliers to take over the customers' portfolio. And in this case, you have 2 options, either some suppliers bid for the portfolio and Ofgem will then choose the best offer or there is no voluntary bid and the Ofgem allocates directly the portfolio to one of the supplier. So this is exactly the current situation in the U.K.

[Operator]

The next question from Ajay Patel from Goldman Sachs.

[Ajay Patel, Executive Director]

So maybe a little bit more short, I just wanted to focus on this year's numbers. So I think at the time we had the H1 results, we had this guidance of greater than EUR 17.7 billion, but the nuclear output target was 345 terawatt hours to 365 terawatt hours. Now I think at that time, we were talking about the EUR 17.7 billion of EBITDA being underpinned by the 345 terawatt hour output target. And clearly, if we look at the end of October, we're at 30 terawatt hours up year-on-year, and we -- but we're on a run rate looking like it's going to be the top end of the range, if not a bit higher. So I guess if I take that and as well as the power price environment we're in, it's a very, very significant higher result than the EUR 17.7 billion guidance -- greater than EUR 17.7 billion guidance we have. So I just wondered what negatives should I be thinking about maybe that could offset that impact? And then, I guess, the second piece to this is just the way that you hedged because clearly, look, prices right now are very high. Every terawatt hour that you gain versus last year is effectively selling power in a very high-priced environment, and therefore, has quite a material impact to your EBITDA. Would you have already prehedged a lot of this? Or is it that any output that you achieve now year-on-year would actually be incrementally selling in these higher price environments? Any clarity on both of those issues would be really helpful.

[Xavier Girre]

First, as regards nuclear output, we are currently doing well end of September, so 268.2 terawatt hours. We could, right, be in the higher part of the range, 345 to 365, for this year. Second, as regards the price, in fact, '21, France output was already fully hedged when starting the year. And as such, recent spike in forward prices won't have a significant impact for '21. And '21 EBITDA will mainly, as a consequence, a benefit from extra nuclear generation and from the part of hydro generation sold at higher spot prices. So for '21, once more, I'm very confident that we will reach our guidance higher than EUR 17.7 billion. I am also comfortable with the consensus, which is EUR 18.3 billion. And as regards potential negatives you referred to, we have in the U.K. situation, which is as regards to nuclear generation a bit difficult. So this might be a negative for H2 '21. So this is how we see the end of this year.

[Ajay Patel, Executive Director]

And is it fair to say that if -- I'm just going to -- if output was higher in November and December, incrementally, it would effectively be selling at these higher power prices that we're seeing on the screen, right? That's a fair deduction to make?

[Xavier Girre]

You're right.

[Ajay Patel, Executive Director]

Yes. Okay.

[Xavier Girre]

But what's more, I mean it's important. I mean, you -- I mean, I share your point, there are some significant positives. There are also some risks I referred, for example, to U.K. and U.K. generation in the U.K. And we all know that the market also is very volatile. So this is why we maintain this guidance, and we indicate to you that we are confident and comfortable -- that we are confident with our guidance and we are comfortable with the consensus for '21.

[Ajay Patel, Executive Director]

Sorry, there was one clarification. I remember there was a press article about the trading loss at EDF. And I just wondered, is there any guidance or rough feel that you can give us on the trading profits in H1, whether that will be lower for the full year or the same or higher or any directional sort of nature so that we can put some sort of bearing or some sort of understanding of where that division goes because obviously, it's a lot -- it's very hard to forecast right from our side?

[Xavier Girre]

Thank you for your question. As I already highlighted, EDF Trading is ahead of both budget and last year trading margin, which translates in group revenue at end of September and at end of October. I highlighted this point, of course, which is important because I highlighted also that the market was extremely volatile, in particular end of September and early October. So we saw in this period unprecedented turbulence over a very short period of time and with a very limited number of books suffered as a result. EDFT has been carefully managing the situation and once more is ahead of budget at last year, both at end of September and at the end of October. I'd like also to tell you that contrary to what was written in some press articles, there was no manipulation within EDF Trading, and no employee has been fired either.

[Operator]

The next question from Emmanuel Turpin from Societe Generale.

[Emmanuel Philippe Turpin, Equity Analyst]

My first question is about electricity tariff measures in France, the so-called freeze for early next year. You highlighted that the actual tariff increase would depend on things that are still to come ahead of us in the last few weeks of the year. Are you comfortable that the measures taken by the government to protect consumers will be fully neutral to EDF's EBITDA in 2022, whatever the outcome of the last 2 events of the year? Do you feel totally protected on that front? Regarding the gas tariff freeze in France, you highlighted today that your portfolio of customers in France residential gas continues to grow, 1.8 million customers. What's your estimate of the likely impact on working capital, the shortfall on working capital that you'll have to finance with the tariff freeze on gas for 2022? My next question is on the U.K., a follow-up on the previous question. Q3 revenues declined year-on-year -- so Q3 revenues declined year-on-year by about EUR 250 million on my estimate. You mentioned some positive trends, for instance, in gas supply, neutral on EBITDA but positive on revenues. That means that the negative effect on having to buyback nuclear volumes was greater than EUR 250 million. Could you maybe quantify this for us? And maybe tell us whether you had managed to, by yourself or cover yourself for the full year at the end of Q3 or whether you started Q4 still having to buy more in the market? I understand it's a bit of a sensitive information that will be helpful for us. And lastly, picking up on one of your very interesting points on modulation, being able to modulate the production of nuclear power plants in France. This is a unique feature in the industry and very positive in these markets. Do you think that being able to reduce modulation is a trend? And -- or is it just a one-off for this year's particular conditions? Would be very interested if you could share with us the actual dispatch factor in the first 9 months, i.e. one minus essentially the modulation.

[Xavier Girre]

Thanks for your questions. To start by your last question, modulation was very high last year due to the demand, which was low. And so this year, modulation is less significant, thanks to a higher demand and thanks to better price. I mean what was exceptional was last year, it's not this year.

[Emmanuel Philippe Turpin, Equity Analyst]

Okay. So it's back to normal?

[Xavier Girre]

Very exceptional as regards to modulation. And it's Important to keep in mind that nuclear assets can be modulated, of course, and this is a significant value that they can bring to the electricity system. As regards the hedging details, I'm sorry, but as you know, we cannot comment too specifically on this point. As regards the tariff tendency for next year, the point which remains to be taken into consideration is the impact of the ARENH auction and the price of this ARENH cropping, which will be determined on the basis of December market. So it's too early today, but we will see what comes from that. For the time being, the decision that has been announced by the government is very consistent because it contributes, of course, to freeze the bill for the end consumer at plus 4% and without having negative impact on the revenues. As regards gas, EDF proposes fixed prices market offers over 4 years or indexed to the evolution of the gas-regulated tariff that will be frozen following a government decision whose sourcing is globally covered. We, therefore, do not anticipate any significant impact from rising gas prices.

[Operator]

The next question is from Arthur Sitbon from Morgan Stanley.

[Arthur Sitbon, Equity Analyst]

So the first one, I was wondering if you could walk us through the main areas of improvement and deterioration compared to your divisional expectations over the summer when you provided the above EUR 17.7 billion EBITDA guidance for 2021. I have the impression that maybe Italy is a bit better, U.K., a bit worse and the rest more or less stable. But any indication would be helpful. The second question is if you are able to provide some guidance on the discount rate change that we can expect for nuclear provisions this year with the rates as they are today, rates and inflation? And my last question is on the transaction you're working on, on the minority stake in renewables at Edison level. I was wondering if you could explain a bit the rationale of this transaction. And given it's a minority stake, I would suspect no capital gain would flow through EBITDA, but if you could confirm that, that would be helpful.

[Xavier Girre]

Thank you for your questions. As regards the trend between half year and today, the positive trend is clear on the nuclear generation in France. On the other hand, it's negative as regards to the U.K. As regards the prices, I mean, the prices have continued to grow, but the volatility has also very, very significantly been increased. So price increase may be positive, but the volatility creates some disturbances. And as a whole, our activity is going well. I highlighted that our Q3 is a very strong Q3, which is, of course, a very positive point for EDF. As regards the nuclear provision discount rate, the rate at the end of the year will definitely depend on the evolution of short-term rates. But as well, it will depend on the inflation rate. So of course, we will assess that very carefully at the end of the year. Currently, as you know, our discount rate or real discount rate is 2.1%. And you may know the sensitivity, which is that a 10 bps decrease in the discount rate has an impact of around minus EUR 600 million in pretax earnings and plus EUR 1 billion under provisions. On the other hand, a 10 bps increase in the discount rate has an impact of around plus EUR 500 million in pretax earnings and minus EUR 900 million under provisions. So I will not give any forecast, but definitely, we will assess the situation, particularly as regards to inflation at the end of the year. As regards Edison, it's clearly a very positive strategic move. We have, along the last years, I mean, strengthened the strategic position of Edison by developing renewables. And in a few weeks, we'll have another financial partner alongside with us in order to develop Edison in this market in Italy. We have also, as you know, sold most of the E&P business, which is a carbonized business, on which Edison didn't have first-rank position. And so Edison is now really ready to be a very strong actor in renewables, in service and also in thermal generation, which is also a significant contributor in the Italian electricity mix. So during the last years, definitely, Edison has been strengthened. Its strategy is absolutely consistent with EDF's strategy and Edison is ready to go on developing its business very consistently with the CAP 2030 strategy. End our discussion. I would like to thank all of you for your questions and for your attendance and to wish you a very happy day. Bye-bye.