Earnings Transcript for EDF.PA - Q2 Fiscal Year 2017

Executives: Jean-Bernard Lévy - Chairman, President and Chief Executive Officer Xavier Girre - Group Senior Executive Vice President of Group Finance

Analysts: Carolina Dores - Morgan Stanley Emmanuel Turpin - Societe Generale Cross Asset Research Vincent Ayral - JPMorgan Chase & Co.

Operator: Good day and welcome to the EDF 2017 Half-Year Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jean-Bernard Lévy, Chairman and CEO. Please go ahead, sir.

Jean-Bernard Lévy: Good morning, ladies and gentlemen. Welcome to this conference call. We will be presenting EDF half-year results. In a few minutes Xavier Girre, our CFO, will give you the detailed figure, but I would first like to focus on some key issues and to give you just a couple of highlights. In my view first half of 2017 is really highlighted by two important achievements. The first one is our acceleration in renewables area and the second one is fact that our balance sheet restructuring is close to being achieved. If I now turn to slides I hope all of you have in front of you, I will start with a brief overview of key figures. As we said, this is on Slide 1, 2017 is a low point in the cycle. Organic sales are slightly down by 1.1% and EBITDA is down more by 20.6% and this is essentially due to lower nuclear and hydro output levels coupled with challenging market conditions and low prices. Net income group share is almost flat at €2 billion. Net financial debt decreased significantly in the first six months of the year. It dropped from €37.4 billion at the end of December 2016 to €31.3 billion at the end of June 2017 and this is due to the benefits of asset disposal and of course our capital increase. If I now turn to Page 2. And so we can quite proud that we are delivering on the performance plan and executing with good performance. This is totally in line even in some aspects ahead of the financial trajectory that we presented in the spring of 2016. Our OpEx have continued to drop, €200 million when compared to the first half of 2016, and total drop of €500 million compared with 2015, which is 70% of the target between 2015 and 2018. If I look at our net investment within the current business portfolio, we consider we have now put this under control. This is down by nearly €300 million as a result of improved selectivity. I now look at the disposal plan. We are very proud that we have already achieved 80% of our initial target, €8 billion of sales out of a target of €10 billion over six years from 2015 to 2020, so we're well ahead of that we have signed or completed very important disposal agreements during the first half and you have this more precisely written on Page 2. So I now turn to Page 3. You can see we have made good progress in the rollout of our CAP 20 strategy in terms of CapEx and in terms of capital increase. And if I now turn to Page 4, you can see some of our key innovations in the customer and services area. Let me explain, EDF & Moi is an app which each and every of our French customers can download to get access to very important consumption data and contract data. This has now been downloaded 4 million times. We have launched a new platform called Electrice Call we have launched some new features on our SmartStation. So we with the new addition to the range which is an electric vehicle charging station that can be controlled from the SOWEE SmartStation. One-year after its launch our product Mon Soleil & Moi which at this stage is geared towards residential uses has already sold to more than 1,700 of our clients. We consider this is around 12% of the market share and the sales are increasing steadily. We're now preparing for Notre Soleil & Nous which is a similar self-consumption solution, but this time for residential buildings where Mon Soleil & Moi is for individual houses. So we see our daily efforts from the workforce in EDF to meet our customers' needs and at the same time offering them a more human and digital experience, all this is really bearing fruit. At the end of May of 2017, as you on the right-hand side of Page 4, our market share in volume in the residential customer electric segment stands at 87.3%. In the gas segment it stands at 10.6%. This makes EDF the leading alternative gas supplier with more than 1.26 million residential customers for our gas offer. In terms of business customers, as you know this is fully deregulated now for the last two years and our market share is stable at around 65% in all segments and we believe this is a huge achievement. So I now turn to Page 5, and look at our achievements in energy services. With regard to energy services for businesses and local authority, we just announced our objective to double our sales in this segment by 2025 and achieve a 2030 target of €11 billion of sales. We now also launched a new brand called EDF Energy Solutions launched in June. We are expanding in many of our subsidiaries. If I look at Dalkia, some of the very interesting achievements, one is in Charleville Charleville-Mézières this is a very innovative solution. This is a renewal of an agreement with this community for another 25 years and this is using both biomass energy and the recovery of fatal heat from [indiscernible] PSA plant in Charleville, a very innovative solution. We also signed an important seven-year agreement for the management of municipal buildings in Valence and the Valence-Romans area. Citelum on a very important contract in Mexico City to modernize, found and manage its public lighting system. This is an important six-year agreement that will bring a €130 million of sales. We will renovate more than 40,000 lighting points. Dalkia's results have improved over the first half of the year with sales and EBITDA increasing organically by 6.5% and 8.9% respectively. We also made an important acquisition in the services area. This is part of our CAP 2030 strategy. We bought a company-based in the United Kingdom through a joint venture between Dalkia and EDF Energy. The name of the company is Imtech and Imtech has more than 2,000 employees, sales of more than £400 million a year, and we will of course build on Imtech to expand our energy services business in the United Kingdom. Let me now turn to Page 6. As I said, we believe one of the highlights, one of the key highlights for the half-year is our acceleration in renewable energy. First, on hydropower. This still accounts for about 20% of our output in France, the Romanche-Gavet project which is increasing the facility's generation capacity by 30%, is making good progress. We also are making good progress on our current construction in Brazil, it is called Sinop and it will - should operate at the end of next year. In the wind sector, the first half of 2017 has been particularly eventful. The major news is that we took over a French-based company called Futuren which is present in France, Germany, Morocco and Italy. And it's a strong player, it will help us accelerate our growth in the renewable area. As far as newbuild is concerned, I will only mention the commissioning of Montagne Ardéchoise which is the most powerful wind farm in that region of Auvergne-Rhône Alpes installed capacity of 73.5 megawatt supplying 80,000 inhabitants. Outside of France, EDF Energy renewables has acquired significant company developing projects in Scotland for a potential capacity of 600 megawatts. For wind, we acquired service companies specialized in the operation and maintenance of offshore wind farms. This is located in the northern part of Germany and is called Offshore Wind Solutions, so name speaks by itself. In terms of solar power we have announced a very important project which is joining the consortium led by Mazda. Mazda is based in Abu Dhabi and we will develop very important solar farm very close by in Dubai which has the name of Mohammed Bin Rashid Al Maktoum. This is a gigantic project of 800 megawatts. We believe it's the biggest of its kind in the world and it's a major entry for us in a very interesting area for solar energy in the Middle East and the Gulf countries. In Brazil, we have continued to be very active acquiring 115 megawatt full to - project in the central part of Brazil. So altogether we have seen a strong growth in installed capacity. We have still good growth in our revenues. Our net installed capacity now stands at 6.7 gigawatts and for the first time EDF's gross installed capacity exceeds 10 gigawatts. We are 10.4 gigawatts and we believe this really demonstrates a very strong growth trend. We have a portfolio of projects under construction increasing by 1.5 gigawatts during the first half of the year including some major achievements in solar capacity. So we believe our migration to a good balance of traditional energy output and renewables is really in good shape and we are very proud of this acceleration in the renewable energy business. Let me now turn to Page 7. Just a few highlights on our nuclear generation area, nuclear output in France. In the first half of 2016 dropped by 8% over the six months of the year due to some of our units not being available. This is in line with our projections. We had flagged that we would not keep the same results as the first half of 2016 for the French unit. In the UK where we already had great results, we've done even better. We are up by 4.2% with our eight operating nuclear power plants generating 32.2 terawatt hours. In terms of the new nuclear - construction of new nuclear units, of course the key challenge for us is delivering on Flamanville. We made an important announcement yesterday that during the testing phase of Flamanville which is now started some of the important milestone is what we call [indiscernible] which we would translate as nuclear circuit cleaning operations and we have now finished this and we announced it yesterday. The testing phase in Flamanville is doing well. We now have more than 1,000 experienced EDF engineers, technicians and industrial partners on site for testing. And we are making good progress overall in Flamanville. We are on line with the schedule and the budget that we announced in 2015. As many of you are aware, a few weeks ago the French nuclear safety authority ASN has approved Flamanville 3 reactor vessels, fitness for service and has required us to plan for a vessel head replacement by the end of 2014 which we of course will do. We will nevertheless submit an in-service monitoring methods to the regulator within the next two years hopefully demonstrating to the safety agency that the vessel head is able to maintain its qualities over the long-term. If I now turn to Hinkley Point, this project is well underway. We have recently issued a statement on the outcome of our internal projects review and I will now walk you through the main conclusions of that. Project completion costs are now estimated at £19.6 billion in 2015 sterling. This is an increase of £1.5 billion in 2015 sterling compared to previous evaluations. The projects review on top of this identified a potential 15 months deferral of the delivery date for Unit 1 and potential nine months deferral for Unit 2. The projected rate of return for EDF on Hinkley Point is now estimated at around 8.5%. In addition to these two projects, major progress has been made in the reshaping of the French nuclear industry in which EDF has the leading role. With regard to New Areva NP, the European Commission has approved EDF's proposed acquisition without any more comments. On the July 12 we decided to partially waive the condition precedent to the future acquisition of New Areva NP relating the approval of the Flamanville's reactor vessel and we now consider and the transaction is due to be completed in the second half of this year. In early July we announced the signature of binding agreements with two partners who will acquire a stake in New NP, Mitsubishi Heavy Industries, the level of 15%, maybe this will be increased to 19.5% and [indiscernible] a French engineering company to the level of 5%. On May 17, EDF Board of Directors approved that we will put in place, and this has been done in the meantime, a newly founded company called Edvance which put the finishing milestones to the convergence of EDF and Areva NP in the engineering area so that our projects will be more competitive. I think this shows that the reshaping of the nuclear industry in France is now well-advanced and as many of you have seen, so the Areva announcements yesterday and what I have said we consider that by the end of the year 2017, we will have finalized the implementation of the decisions made by the French state in the early summer of 2015. Let me now handover to Xavier Girre who will present the detailed figures for the first half of 2017. Thank you very much.

Xavier Girre: Thank you. Good morning. I'm happy to share the highlight of our 2017 half-year results with you. Chairman Jean-Bernard Lévy walked you through our progress on delivering our performance plan, and we share further details about it. I will then present our financial for the first half. On this first Slide, the key figures, Jean-Bernard already presented these key figures to you. So just one word, these results are consistent with the drivers we outlined at the end of 2016 when disclosing the 2017 guidance. On the next Slide, as regards the OpEx; Jean-Bernard also gave you an overview of each component of our performance plan. I will focus on OpEx and on CapEx. First, as regards OpEx, our target is to cut them by at least €1 billion in 2019 versus 2015 with the first milestone of €700 million in 2018. As you know, in 2016, on a comparable basis with 2015, OpEx were cut by roughly €0.3 billion. Compared to H1 2016, OpEx were down €0.2 billion over the last six months. The group therefore continues to deliver on its savings plan and is well on track to meeting its targets. These OpEx cuts reflect our efforts on staff and on external costs. They are delivered in full consistency with CAP 2030 strategy. In the renewables and services activities which are key growth drivers, OpEx are increasing. In all of the activity, in particular French generation and supply and overhead OpEx are cut. You will find the detailed figures in the appendices. As regards the net investments I'd like to share with you three takeaways; first, we continue to reduce the net investments under scope excluding Linky, new developments and disposals. On this scope investments are down to €252 million overall compared to the same period last year. This is driven by the end of certain investment programs and to further optimization efforts in the maintenance of generation assets across all segments. Second point, we accelerate investments in strategic activities in consistency with CAP 2030 strategy. You see first renewables EDF EN gross investments grew by €355 million. This allowed EDF EN to acquire the control of Futuren and slow its asset rotation pace as you can see on the slide. You see also Linky, a new development especially in new nuclear and offshore wind, they grew by around €500 million versus the first half of 2016. As regard the third point, as you can see with more than €4.3 billion in disposals including the RTE transaction, overall net investments came just below €1.5 billion. Let me now come to my second point, the review of the group H1 2017 results. Group EBITDA is down to €7 billion versus €8.9 billion in H1 2016. In organic terms this represents a negative change of 20.6% or close to €1.9 billion mostly due to three segments. EBITDA in French generation and supply fell by €1 billion, minus 28.10%. French regulated activities were down €0.4 billion, minus 14%, UK EBITDA fell €0.4 billion, minus 24.4%. I will focus on these three points. First as regards the French generation and supply EBITDA, it was down to €2.45 billion driven by several anticipated factors. I will focus on five key items. First generation with an overall negative impact estimated at over €0.5 billion from lower nuclear and hydro output. As regards nuclear output, it was down 8 terawatt hours to 197.2 terawatt hours, compared to the first half of 2016 generation from the French output was mainly penalized by first the extended outages and [indiscernible] and Fessenheim 2 linked to Le Creusot manufacturing quality issues. Second by outages in the first quarter linked to the last additional controls on steam generators to address the carbon segregation issue; and lastly by un-planned outages at Flamanville 1 and [Catanam 1] offset by the good performance of the reactors online over the period. As regards hydro output it fell by 4.2 terawatt hours which reflects the weak hydro conditions met over this first half. The second factor driving the EBITDA trend in this segment is related to the wholesale market activities. EBITDA was penalized by the 40.7 terawatt hours of RN volumes delivered in H1 2017. High spot prices driven by the cold spell in January also carried a negative effect as EDF had to buy power on the market to meet strong customer demand. The estimated combined effect on EBITDA is another negative €0.5 billion. As you know these first two factors are closely linked and are not expected to be repeated. They are a key component of our 2017 EBITDA and of the significant improvement we expect for 2018. The third factor is linked to the downstream margins which were penalized by price effect as lower average market prices were reflected in market-based supply contract and by a 5.2 terawatt hour's reduction in supplied volume. The combined negative effect on EBITDA is estimated at €0.2 billion. The fourth factor is the introduction of the capacity mechanism which had a positive effect. Capacity certificate prices came to €10 per kilowatt in the auctions passed forward to end customers and sale on capacity auctions generated an overall EBITDA impact of €286 million. And the fifth factor is the rollout of our performance plan in French generation and supply activities which delivered €272 million in OpEx savings. The next slide I just commented nuclear output in the first half and cumulative output in 2017 is expected to gradually catch up with the level of 2016 over the third and fourth quarters. The corresponding period last year had been as you know affected by carbon segregation tests as well as by [Biget 5 and Gravin 5] outages. Both reactors were started this week. Accordingly the group confirms its 2017 target range for French nuclear output at 390 terawatt hours to 400 terawatt hours. On the next Slide, the hydro generation trends that are down 16.5% versus the same period last year. And as I said this is due to changing hydro conditions with driest first half in France since 2011. The second key element to explain our first half EBITDA is in to the regulated activities. EBITDA in regulated activities was down 14% to €2.4 billion. First, weather was less favorable compared to the same period last year, a period that also included one more day with 2016 leap year. The impact is a negative €91 million. Second extreme weather events over Q1 2017 triggered increased operating costs and power cut compensations at Enedis amounting to €62 million. In addition H1 2016 benefited from positive one-off, in particular in [i-learn] activities. Third key point for our half year EBITDA the UK on Slide 21. In organic terms, EBITDA was down 34.4%. The drop in UK wholesale power prices carried significant negative in realized nuclear prices. In supply activities the number of customer accounts was almost stable compared to end 2016 with lower consumption due to weather conditions. Nuclear output helped mitigate those negative factors to some extent. The UK fleet continued to show strong performance with a good availability. Generation was also supported by the favorable schedule in the first half of 2017 refueling operations. As a result, output is up 1.3 terawatt hours to 32.2 terawatt hours. Edison has posted a very good first half, and Italy as you can see the EBITDA came to €426 million up 28.4% in organic terms. The performance in electricity activity was lifted by average electricity sales prices. In addition output and margins were up in thermal generation. This mitigated the impact of poor hydro conditions and hydro power output. Hydrocarbon activities benefit from higher Brent and gas prices and optimization of maintenance costs in E&P activities also carried a positive impact. Lastly, downstream activities benefited from improved margins. In this context, Edison upgraded its 2017 EBITDA to about €700 million. Let's focus now on EDF Énergies Nouvelles. Overall EBITDA performance is down 20.4% over the first half to €451 million. But this reflects the fact that EDF EN reduced its asset rotation pace triggering lower EBITDA contribution from the DSSA activity. This is consistent with the clear acceleration of the group's development in renewables and of the strategic capital allocation to growing overall renewables assets portfolio. As a result EDF EN's development was strong over the first half. Net installed capacity grew 0.8 gigawatts to 6.7 gigawatts. This contributed to a 5% increase in renewables output. Future capacity growth will be supported by growing portfolio of gross capacity under construction reaching 2.4 gigawatts including 0.9 gigawatt in solar PV. If we now turn to Dalkia, Dalkia EBITDA is up 8.9% this first half. Dalkia continues to be active on the commercial front with a number of contracts signed and are renewed with local communities and industrial customers. In addition, two positive drivers supported EBITDA over the period, higher energy prices and favorable reviews of index-based services contract. EDF trading performance is stable. The impact of challenging conditions in North American markets was upset by the positive effect of volatility in Europe at the beginning of the year. Moving finally to the other international segment on the next slide, EBITDA in the segment was down organically by 21.5% to €275 million. In Belgium EBITDA fell by 40.4%. This was driven by reduced nuclear output and lower sales prices. Renewables output was penalized by unfavorable wind and hydro conditions. In this country also in line with CAP 2030 strategy, the group continued to invest in wind capacity and energy services. Poland's EBITDA is slightly up mainly supported by higher head volumes and lower coal prices. As you know you know EDF Polska's assets are currently under a disposal process. Lastly Brazil was penalized by the annual tariff review of [indiscernible] PPA. Note also that 2016 was an exceptional year. Let's now move to the rest of the P&L. Starting with EBIT which is down 14% at €3.9 billion; the higher D&A come partly from an accelerated depreciation on oil-fired assets in France. The RTE transaction delivered a pre-tax disposal gain of €1,462,000,000, and lower impairments also carried a positive impact. On nonrecurring items on the next slide, you can see the post-tax effect of all nonrecurring items in H1 2017 at plus €0.2 billion versus a negative €0.9 billion last year. Group net income on next slide which comes to €2 billion group share. Net income benefits in particular for an improved financial result with two key supporting factors among others; first the lower cost of debt with among others positive effects of continued proactive debt management increased in context of low interest rates. And second, disposal gains on dedicated assets. Income tax stands at €712 million, down 25.8%, consistent with the income level. In addition the effective tax rate benefited from the reduced tax treatment of the long-term capital gain of the RTE disposal. When excluding nonrecurring items recurring net income come slightly below €1.4 billion. Looking now at the first part of the cash flow. Operating cash flow stood at €4.2 billion down from €8 billion in H1 2016. This follows first the evolution in EBITDA. Tax disbursements were also much higher as H1 2016 had benefited from nonrecurring income tax reimbursements on tax installments paid in 2015. Cash flow after net investments came to €3.2 billion and it was supported by asset disposals, especially RTE, and by a positive evolution in the change in working capital requirement. The next slide you can see that in order to respect the regulatory requirements, the dedicated exceptions was allocated €1,095,000,000 in H1 2017. At the end of June 2017, our coverage ratio is higher than 111%. After deducting the interest payments on hybrids and the share of the dividend paid in cash, group cash flow stood at €1.5 billion. Finally on Slide 30, this slide shows the change in net financial debt which was reduced by €6.1 billion at €31.3 billion. Operating cash flow and the change in working capital requirements roughly covered net investments on the current scope. And the improvement in net financial debt was also largely driven by disposals and by the capital increase. Now, maybe back to the guidance.

Jean-Bernard Lévy: Thank you, Xavier. Very extensive presentation of our numbers and let me just tell you as you can see on the next slide that very simply we confirm all our targets for 2017 and 2018 and beyond. This ends the first part of the presentation and we will now turn to the Q&A part of this session.

Operator: Thank you, sir. [Operator Instructions] Now we come to the first question from Carolina Dores from Morgan Stanley.

Carolina Dores: Hi. Good morning, everyone. Thanks for taking my questions. I have three questions please. If you can give us comments about your view on what will be the government policy on carbon tax because the government has announced a carbon tax, but as I understand it doesn't seem to apply for electricity. So I guess my question is do you believe there's going to be a policy that is going to push power prices up and what is the time for that? Second thing on regulated tariffs, the state council has ruled against regulated gas tariff. There has been some comments in the market saying that electricity tariff should grow as well. What's your view on that? And third, Mr. Hulot has said that the French government may not be able to postpone the renewable of hydro concessions forever, so you have 4.8 gigs up for renewal, if you have any idea on timing of when would that happen? Thank you very much.

Jean-Bernard Lévy: Thank you very much. Your first question relates to the carbon policy for electricity generation. As you well know, the French government has released very early on what they call [Plan Chema], I don't know if it should be translated by climate plan, but have a reference document which of course includes having a very strong carbon policy and fighting climate change, and we believe that in due time there will be some measures taken in Europe or in the French environment or maybe the countries that would be interested to do that in order to have an effective ETS scheme or an effective carbon tax scheme. We believe right now we are watching what's going on in the European parliament. We are watching what's going on within the French scene. We believe that in due course we will have the benefits of a more intensive and more effective carbon policy regarding electricity generation in Europe. Regarding regulated tariffs and gas and electricity and the state council decision a few days ago which you mentioned, that was your second question, quite clearly if you read the state council statements. There is a clear difference which has made clear distinction which is made between gas and the electricity regulated tariffs whereby clearly the state council is flagging that they view differently the situation on gas and the situation of electricity, electricity both being an essential need of people whereas gas is not and electricity being what they called not substitutable, no substitute to have. That means that for instance for lighting just to take an example or for lots of other usages. You cannot substitute any other energy to gas whether it seems in the view of the State Council that in all cases you can substitute to gas in all conditions some other primary energy sources. So obviously this means that from our perspective, and I think this is shared by many people watching the situation including within the government. There is a clear distinction that the State Council is requesting that there is an end, which is put to the regulated tariff for gas. And that this doesn't mean that it will be the same for electricity regulated tariff. So we expect that the government will not manage similarly, the very strong and very demanding situation regarding gas and the quite different review regarding electricity. On the third point, which is the hydro concessions, as you know we are together with the French state because we are both part to the discussions we have. We are having extensive discussions with the European Commission regarding the hydro concessions situation, whereby some of these have expired and that offers have not been put in place at this stage and we expect that at one point in time, there will be positive end to these discussions, which obviously will include some tendering for some of what they call expired concessions. But this is part of a more global view regarding the hydro situation and importance of the hydro system in Europe, which is part of the discussions with - between France and the European Commission. As you know they're very flexible and significant hydro system in France is playing an important role in the stability of the electric system all over Europe and this is part of what is being discussed between France and the European Union.

Carolina Dores: Thank you.

Operator: Our next question comes from Emmanuel Turpin from Societe Generale.

Emmanuel Turpin: Good morning everybody. I'll start with a question to follow on Carolina's point about hydro concessions and the intensive discussions with EU. Are we still thinking about public-private partnerships in France? Is this still the main route that we are looking to go down to solve the longstanding discussion with EU? That's point number one. Point number two, on Areva NP, can you update us on whether you are still looking for other partners or to reduce further the stake you would end up with on Areva NP, and could you update us on implication for cash outflows as you look to complete in the second half essentially implications on net debt for EDF? On lastly couple of detailed points, could you provide us with the figures on disposal gains for dedicated assets in the first half, you said they were higher, so basically the H1 2017 number in comparison to the H1 2016? And finally working capital, notoriously difficult to forecast in an EDF model, there was a very positive result in H1. What should we put in our model for the full-year best effort on your side? Thank you very much.

Jean-Bernard Lévy: First question regarding hydro concessions and the private-public partnership, as you know the French law, the recent legislation dating from 2015 is now addressing this question, this issue and contemplating that there could be some solutions implemented with private-public partnership. This is something that is a potential solution, but is not at this stage being implemented. We expect that if such a solution is implemented, it will not be in the very short-term. Regarding Areva NP, as we stated, we have two partners. We expect to know shortly whether the addition of the two existing partners leads to 20% or 24.5% of opening of our equity. And we could reduce further EDF's stake. This could be done in the short-term or in the medium-term. It could be done now or it could be done after we close, and as we said we expect to close by the end of 2017, and I would say the implication for cash outflow would be the very clear arithmetical percentage of €2.5 billion for 100% of the equity value multiplied by the percentage of EDF stake, which at this stage everybody has to expect will be around 75% and I will let Xavier respond to your two other questions.

Xavier Girre: Yes, thank you. As regards the disposal gains in the dedicated assets, we have accounted for €491 million capital gain. During this first half of the year and it was €256 million during the first half of last year. As regards the working capital, you remember that we had highlighted the fact at the end of last year that we had a negative impact and we expected it to be reversed. It has been the case. It was due to the tariff regularization, which happened at the end of last year and which is progressively cashed in. We had also a favorable impact of the climate, which had also favorable impact for this first half. And a third key point, which is linked with the CSPE. We were supposed to get some cash at the end of last year in the range of €400 million, which was at the end of the year postponed to at the beginning of this year, and also the reform of the CSPE, which happened last year had also positive impact. So these are the three key points, CSPE, climate and tariff regularization, and there are some others that can be added in particular as regards the trading. We also highlighted at the end of last year that we had positive impact on the trading margins, but also negative impact on the working capital requirement. This has been also reversed at the beginning of this year. You have all the details of course in our financial report, but these are the key points of our working capital requirement for this half year. And once more it's roughly speaking in line with what we said at the end of last year.

Operator: And our next question comes from Vincent Ayral from JPMorgan.

Vincent Ayral: Good morning. Can you hear me this time since we have some issues with the phone?

Xavier Girre: Yes, we hear you very well. Good morning.

Vincent Ayral: Yes. Okay, good morning. Sorry about that. Jumping from one conference call to the other has been a bit tricky. And so here I see - and my biggest questions were asked on the CO2 regulated tariffs and hydro concessions. But I'd like to come back quickly on the one point on the CO2? In Plan Schema you talked about a carbon tax, which does not seem to apply to generation from the way it was described. However, it says that it would improve the competitiveness of renewables. So that clearly generated some confusion here. What is your view there and does this government and - do you have in this Plan Schema a tax carbon generation or not, so why these comments, or trying to understand a bit this bit? And the second question would be more numbers then, we had fairly low hydro and a hot summer, so we got further nuclear outages or low output potentially for the summer, then maybe some political unrest with the reforms in the autumn, how did you account for these potential headwinds on the generation side in your guidance? Thank you.

Jean-Bernard Lévy: The first question it is quite clear that the French government has implemented some specific tax on carbon - CO2 generation, which stems from non-electric non-power usage of fossil fuels such as filling up your car or things like this, and this is now in place and yielding to quite some results when you look in the long-term outlook for this kind of products I believe in generation area where obviously markets are not only national market, not only nationwide markets, but also goes somehow beyond borders due to exports. So one has to look at it in a European area as at the same time what is being looked at is a way to offset the lack of efficiency of the European scheme, which has obviously totally failed. We hope it will improve in the future, but at this stage with €4 or €5 for carbon tax, I think this failure is very obvious. So I think in the Plan Schema, the French government is looking for the right solutions to compensate for this lack of efficiency of effectiveness at the European level and we expect that some of this will come in the next few months. Regarding generation guidance, we are little puzzled by your question. We're not really sure we understood what you meant, but just let me tell you we believe that our generation guidance, which is a 390 terawatt hours to 400 terawatt hours for the nuclear generation in France, and I think this is probably what you had in mind, we believe this is a very solid guidance. We are in line with it. We believe the improvement over what we achieved last year is well baked in the guidance considering that the nuclear safety agency work on some of the units that were not available during some of the last few weeks and month of 2016, we will not replicate that in 2017 because these units are now okay to get back in operation since the end of last year and the beginning of next year. And while we still have a couple of units, which are not available for the short and medium term and this is mainly Fessenheim 2 and Paluel 3, for some reasons we can explain if you need more, but we believe these are the only two units, which have some I would say midterm in available whereas the rest of the fleet is going through its normal operations life, operating life, maybe we can turn to the next question.

Operator: As there are no further questions in the queue, I hand the call back for the moment.

Xavier Girre: Thank you, Operator. We are taking also questions from the web and we have a question from Martin Brough and the question is Martin Brough from Deutsche Bank. The question is when do you expect to make investment decisions on further new nuclear builds in the UK or France and do you expect to incur significant new reactor development expenses before these decisions?

Jean-Bernard Lévy: Thank you. Let me first turn to last part of the question. We have a team of people that is now within Edvance, which is our 80% - 20% joint venture between EDF and New Areva NP. Edvance is now formed. The people working in Edvance, we have a team of people working on what we call optimized EPR, which will in due course deliver a design, which will even further improve the excellent performance of EPR regarding mainly its cost-efficiency. So based on this we will very likely discuss with the government in the next few quarters, the next few years how to implement the start of the renew - how we renew the French fleet as we know some of the reactors will get closer to the end of their life in one decade or two decade and we have to prepare for this. And we will be discussing with the government how we implement this policy for new nuclear build in France based on this optimized EPR, which is a project we've been working on for the last three or four years. As I said it will improve construction efficiency of the product yielding to significantly lower cost for this new nuclear energy. Difficult for me to give you more detail as to what we expect regarding the right time line, but obviously the next few years will be the right time line for detailed studies, discussing the right regulation and financing, checking with the Nuclear Safety Authority and how this would be implemented? Of course we already have discussed that with the Nuclear Safety Authority. And an investment decision similar to what we did on Hinkley Point last year will certainly be contemplated for such a project in the next few years. Regarding the UK project we have our Hinkley Point up and running and you know all about it, and regarding other projects in the UK as part of the agreements we have with the British government and also supported by our Chinese partner. We are working on implementing two more EPRs on the site called Sizewell, where we already have nuclear reactor operating existing sites and we are also working on implementing the Chinese technology, Chinese-based technology 1,000 megawatt or 1,100 megawatt reactor on the new site, which is called Bradwell where there is no existing operations. This is part of the agreements that EDF signed with CGN and with the British government a few months ago at the end of 2016. At this stage this is a still in study phase and we are not contemplating investment decision for Sizewell or for Bradwell before a few years.

Xavier Girre: We have another question on the web from Peter Bisztyga at Bank of America Merrill Lynch. Please can you clarify your comments on the Plan Schema? Do you think the French government is still working on and planning to implement a unilateral carbon tax? What will be the rationale for such a tax if coal generation is going to be shut by 2022 anyway?

Jean-Bernard Lévy: I mean, I believe yes. I believe the government is working on it and I believe for further details you should ask Mr. Hulot.

Xavier Girre: Thank you and question from [Catherine Berdoel] at Barclays. In fact she had two questions, but one was already answered on their regulated gas tax decision from the consulate. That's why I'm taking the second question, which is given the favorable refueling schedule in the UK should we expect a lower output in H2 for the UK nuclear feet?

Jean-Bernard Lévy: We do not communicate any detailed target for half year or for the UK. Last year 2016 H2 was very good, had very good numbers and we expect similar numbers for 2017 H2.

Xavier Girre: Maybe I'm taking maybe last question in fact from the webcast. It's a follow-up question from Peter Bisztyga at Bank of America Merrill Lynch. How do you interpret [indiscernible] comments about meeting the 2025 target to reduce nuclear to 50% of the energy mix? He has talked about 2017 or more reactors closing.

Jean-Bernard Lévy: I am not - I do not intend to make comments about comments made by the French minister regarding existing legislation, which everybody is aware and is existing law of these matters and I will stop short of making such comments.

Xavier Girre: Thank you. Do we have other questions, Operator, on the phone?

Operator: We don't have at the moment. [Operator Instructions]

Xavier Girre: We're going to give people maybe 30 seconds and if this is it, I think that was the last question from - for the conference call. Any more question on the phone?

Operator: There are no questions on the phone now.

Xavier Girre: All right. Thank you. I think we're good to go then. Thank you for attending this conference call and we'll see you later. We are available for any further questions. Obviously, the IR team is obviously available for your follow-up questions. Thank you. Bye.

Operator: That will conclude today's conference call. Thank you again for your participation. Ladies and gentleman, you may now disconnect.