Electricite de France SA (OTCPK:ECIFF) Full Year 2018 Earnings Conference Call February 15, 2019 3:15 AM ET
Company Participants
Jean-Bernard Levy – Chairman, President and Chief Executive Officer
Xavier Girre – Group Senior Executive Vice President and Group Finance
Conference Call Participants
Vincent Ayral – JPMorgan
Emmanuel Turpin – Societe Generale
Louis Boujard – ODDO BHF
Ajay Patel – Goldman Sachs
Sam Arie – UBS
Olivier Van Doosselaere – Exane
Jean-Bernard Levy
Good morning. Good morning, to you all, and welcome at the headquarters of EDF for this meeting. We will, of course, present our annual results for 2018. Let me tell you, we are very pleased because we said we would do it and we indeed have delivered the rebound that we have promised. This is reflected in the numbers and the figures that we are publishing today. And I have to say, we are very happy with our performance.
As each and every year, we are a profitable company. This year, our EBITDA has shown a double-digit increase. Our balance sheet is stronger, all our key objectives has been exceeded. Our debt level is stabilized, and I will come back to this later. This rebound can also be seen in our market performance where we have successfully resisted very quite aggressive competition. The initial positive results of our marketing offensive are driven by our innovative spirit and our further evidence of this rebound. As far as low carbon power is concerned, we have accelerated the growth of renewables with record highs in 2018. It is also clear that we have succeeded in commissioning the world’s very first EPR at Taishan, this is a major achievement for the French nuclear industry, which is revitalized.
EDF is at the helm of the nuclear industry in France, and this will open doors for us into international markets. 2018 will, of course, be also noted for the French government’s announcements regarding the country’s multi-annual energy program, the PPE, which will span the next 10 years. This road map sets a major priority. Reducing our country’s carbon emissions is the priority, while, of course, we have to maintain our security of supply. The PPE highlights low carbon electricity and, more specifically, nuclear and renewable power. They are the key drivers behind our ambitions. And for EDF, these guiding principles are essentials, as they confirm our convictions, they form our strategy, our CAP 2030 strategies basis.
Through the implementation of CAP 2030 that we have been rolling out for the past four years, we are already underway to achieve strategic objectives that are aligned with the key principles of the French national energy policy. In order to secure the achievement of these targets, we have stepped up the pace of transformation, this has engaged our entire workforce and energized all our business sectors. Nuclear renewables, heat, trade, central functions.
Last but not least, we initiated over the last 18 months three major plans, the solar plan, le Plan Solaire; the electricity storage plan, le Plan Stockage Electrique; and the electric mobility plan, [Foreign Language]. These plans are leading us towards an increasingly low carbon future, and we are already witnessing the first concrete steps in the good execution of these plans. So I want to extend my congratulations and my thanks to the women and the men who worked for EDF Group, their unwavering commitment, their innovative spirit, their professionalism do them credit, each and every one of them has contributed to these excellent results. I would like also to say that I am very proud and honored that I will lead the very prestigious EDF Group for the past four years, pending approval by the French parliament, and I want to thank the French state for renewing its trust in myself.
So we now move on to the key figures for 2018. In 2018, EDF met and even exceeded all its operational and financial targets. EBITDA amounts to almost €15.3 billion, and stands at the upper end of the projected range, as we have forecasted, the latter having been revised upwards back in July. EBITDA shows a strong organic growth rate of 11.3%. So we have fully met the commitment we made last year towards this significant rebound in terms of our major KPI for profitability. This growth of EBITDA is primarily due to the strong operational performance of our nuclear and hydro facilities in France as well as to the growth of EDF renewables. It is also due to the excellent results obtained by EDF Trading and to the very good execution of our performance plan as we have exceeded our cost-cutting objectives.
Similarly, our cash flow target, which was set more than four years ago, as you are well aware, our cash flow target was met, the actual figure of €1.1 billion, compares with an initial target that was close to balance, so very positive.
Our net financial debt is now €33.4 billion, so it is flat, and the EBITDA to net financial debt ratio stands at 2.2. Yesterday, the Board of Directors decided to recommend to the general assembly of shareholders a dividend payout of €0.31 per share for financial year 2018, which means that the payout ratio is 50% when compared to net income, excluding non-recurring items.
As regards sales, net income, excluding non-recurring items and net income group share, Xavier Girre, the CFO, will walk you through the details in a few minutes. In addition to the year’s strong performance, the sustained execution of the performance plan is also very satisfactory, yet, again, with all targets being exceeded or met.
Let us start with the savings plan. Over the period of 2015 to 2018, our initial savings target of €800 million has been exceeded by 160%, we have done 120% of what we expected. And in a few minutes, Xavier will describe, in more detail, the underlying actions behind these numbers. Over the same period, we implemented actions to optimize our working capital requirement for a total cumulative gain of more than €2.1 billion. This is also beyond the target, which had been set at €1.8 billion. We have completed our €10 billion asset disposal plan with two years ahead of the schedule, thereby significantly helping to improve our balance sheet and refocus EDF on its strategic priorities. And lastly, we have kept up with our efforts to control our investment, which amounts to €14 billion.
The results we have achieved in 2018 are an outcome of the decisions that we made four years ago, when we launched CAP 2030. Since then, we have been focusing on three priorities and on the transformation plan, encompassing all the facets of our business, and let me share with you some of these achievements.
Competition on the electricity market is intensifying across the whole of Europe, we have seen new players that understand what we know, electricity is the energy of the future. So they want to come into this market, and we see erosion of our customer portfolio, which we consider to be normal and predictable. But it is not insurmountable. We are resisting, in reality, quite successfully, thanks to well-chosen strategies on each of our markets.
In order to face up to this competition in France, we have redoubled our efforts and, at the same time, we want to leverage our three major strengths before the close ties that we have forged with our customers, thanks to our 5,000 advisers, all of them are based in France, and we are the only ones that can claim this.
Thanks to the quality of service, of which we are very proud and which is recognized by our clients, and thanks to our ability to innovate. We have, indeed, pursued and even increased our marketing offensive, and these efforts are starting to bear fruit. One year after its launch, our totally new offer, Vert Electrique, has already attracted more than 210,000 customers. We have just launched our first 100% online package, which is called Digiwatt. And we will soon launch commercially, we announced it just recently. Mon chauffage durable, which is a package to encourage customers to replace the old oil, gas or coal fired boilers with heat pods. All this can be done with a financing system that enables lower-income households to cover the project costs.
The momentum has continued into 2019. Just as you know, a week ago, we unveiled our new IZI by EDF platform, which is designed for residential customers and businesses, [indiscernible] shopkeepers, self-employed professionals. We are aiming to become the standard bearer in the provision of services for the home and the workplace, ranging from small-scale jobs to energy upgrade projects. We’re also very active in other European countries. As an example, in Italy, our subsidiary, Edison, has strengthened its market position by acquiring a portfolio of 500,000 customers coming from Naturgy originally. As regards the provision of services to businesses and municipalities, our specialized subsidiaries have continued to pursue EDF’s low-carbon ambitions, both in France and abroad.
Dalkia is continuing to grow with new contracts for renewable heating systems, such as in cities, like Perpignan, we have also strengthened Dalkia’s position in the U.S. by acquiring a company called Aegis Energy. In Italy, Edison has done the same by acquiring Zephyro. We also decided to step up our positioning on the electric mobility service side. We indeed intend to become Europe’s electric mobility leader by 2022, and, more specifically, in our core four European countries. We are also ramping up our marketing strategy, our subsidiary Izivia, which was Sodetrel before, but now it’s called Izivia, just won and is setting up 600 charging points in the metropolitan area of Lyon, while also extending and operating a network of changing points throughout the country, such as for instance in the Greater Nice Area.
Let me now move to the second priority of CAP 2030, low carbon power, with its two cornerstones: nuclear and renewables. They are, as you know, interdependent and indispensable when it comes to fighting, effectively, climate change issues. Whilst our energy mix is already among the most carbon-free, we have undertaken to reduce our direct carbon emissions by 40% between now and 2030, and we are already well underway in 2018. Our carbon emissions dropped to a record low, as you saw on the film before, they decreased by more than 70% when compared to 2017. This is thanks to the disposal of high carbon assets, but also to the operational performance of our renewable and nuclear generation facilities.
2018 has been a great year, in all respects, for our renewables business. It was a good year for hydro generation in France, hydropower generation is up by 25%, a 15-year record in terms of output. But we have also increased our renewable output, excluding hydro, and this has grown 14, 1-4, 14% for the second year running. These very good achievements are due to a number of large-scale projects commissioned by EDF renewables, and totaling 1.6 gigawatts across the globe.
This growth will continue as this is reflected in some of our achievements for which 2018 will be remembered, and I will just give you a few of these great contract wins that we have been awarded recently, like the first large wind farm in Saudi Arabia, which is the largest in the Middle East with 400 megawatts, where we are in a partnership with – in a consortium partnership with Mazda. Our portfolio of construction projects in the renewables field is very well balanced between solar and wind and is today 2.4 gigawatts, which is 28 – 21, sorry, 21% above what we have achieved at the end of 2017.
We’re also expanding our le Plan Solaire, which I unveiled in December 2017. It is on track to deliver its promises by 2020, as we had predicted. Since early 2018, the amount of land that we have managed to secure has more than doubled. We have also just recently announced, that was last night, yesterday evening, that EDF renewables is into – entered into exclusive negotiations to acquire a company based in France, called Luxel Group, which is specialized solar energy. Luxel has 90 megawatts of existing capacity, but close to 1 gigawatt of development projects. This acquisition will provide EDF Group with additional assets to implement the solar plan through which we expect to obtain a 30% share in France’s solar market over the period of 2020 to 2035, and to reach an installed base of 30 gigawatt of solar capacity in France by 2035.
Storage has also been highlighted as one of our major growth areas. We are seeking through our [Foreign Language] Electricity Storage Plan to become Europe’s electricity storage leader by 2035, with the aim of commissioning 10 gigawatts of new storage capacity on a global scale.
Let me now move to the second cornerstone of our low-carbon generation business, which is nuclear energy. In 2018, nuclear power output was in line with our projections in France, up by 3.7%. Nuclear safety is our overriding priority, and we are happy that 2018 witnessed a record-low number of automatic reactor trips, which, as you are well aware, is a key operational performance indicator. 2018 will also be remembered as the year in which the first EPR in the world was commissioned in the south part of China, in Taishan.
We built this reactor, together with our partner, CGN, our partner for the past 35 years. Taishan 1 has now been safely delivering low carbon power to China’s southern population since December 17, 2018. 2018 saw the complete refounding of French nuclear industry. We now have fully integrated Framatome into EDF. Framatome ended the year with a €3 billion order income and a drop in fixed cost, and we are very satisfied with Framatome’s operating performance.
Across the channel, our nuclear projects are progressing as expected at Hinkley Point C. We have cleared all the three major milestone set for 2018, including the completion of reactor’s final design, including the commencement of the concrete – first nuclear concrete sporing for the unit 1’s common raft, which work with that one being completed, hopefully, by the end of the second quarter of 2019. Third pillar of CAP 2030, as you know, is our international business, and we intend to strengthen continuously our foothold outside of Europe.
Let me highlight a very good momentum of our business in Africa, which is a strategic part of our international expansion. In 2018, we signed binding and final agreements for the construction of the Nachtigal dam, which is the major project for Cameroon, it will generate when it is finally built 30% of the country’s electricity. In Africa, we are also active in the off-grid sector, a great business that we are very proud because we provide electricity access to some of Africa’s most rural areas through the use of off-grid solar kits.
Just two years after we launched in the Ivory Coast, we are market leaders and are also doing business in three of other countries, Togo, Ghana, Kenya. In total, 72,000 African households have acquired our off-grid offers, and considering the size of the household, this means about 450,000 people, which did not have access to electricity now have access to electrical power, almost 0.5 million people in two years. I think we can be very proud of this.
We are also expanding in Asia. We are diversifying our business in China. We are also building new projects in Latin America. So this is the end of my presentation for the 2018 achievements of EDF. I will now let Xavier walk you more in details, through quite a good set of numbers. And I will come back with you in a few minutes. Xavier?
Xavier Girre
Good morning. Thank you, Jean-Bernard. I’m very happy to walk you through our financials for 2018. First, a quick look at the key figures again. Sales amounted to €69 billion. EBITDA came to €15.3 billion, at 11% in organic terms. Net income stood at €2.5 billion. Net income group share at €1.2 billion, 63% below 2017, which had benefited from the capital gain of 49.9% of state disposal, and from sustained market financial performance with no equivalent in 2018. I will come back to that in detail to this specific item.
Net financial debt is broadly stable at €63.4 billion, and the net financial debt-to-EBITDA ratio is reduced to 2.2 times. Before detailing these figures, let me say, a few words on our performance plan, starting with the cost-cutting program, as Jean-Bernard Levy highlighted. Our target for 2018 was to reach €800 million cumulative reductions versus 2015, and we actually delivered €962 million. Cuts have been delivered mainly by France, generation and supply with contributions from all activities. They reflect our efforts and purchases and on staff costs, and they also reflect our transformation program, as illustrated by the savings achieved by corporate functions for more than €100 million.
At the same time, this effort is carried out in consistency with the strategy, as illustrated by the continued increase in operational expenses at the level of EDF renewables, which has to invest in development costs to deliver the expected growth. All in all, the group continues to deliver on its cost-cutting plan and is well on track to meeting its 2019 target.
Turning now to the other pillar of our performance plan, disposals. We have reached our €10 billion target two years ahead of schedule. In a nutshell, this plan was made of four main blocks. First, selling non-controlled assets that were mobilizing large amounts of equity, the most important one being the 49.9% stake in RTE. Second, exiting non-core markets and also intensive activities that did not fit with the CAP 2030 strategy. Third, penetrating the balance sheet with the disposal of real estate assets. And fourth, exiting gas infrastructure assets. With the execution of this plan that had been set up when market conditions were very adverse, we have clearly demonstrated the capacity of the group to react to such adverse conditions and to adapt quickly.
Let’s now have a look at the group’s 2018 operating performance. As already said, you can see that 2018 delivered a double-digit growth in group EBITDA, and this is mainly driven by different generation and supply segment whereas the business in the UK explains difficult market conditions. EBITDA in Italy is broadly stable, excluding the 2017 one-off capital gain. EDF Trading also performed strongly, taking advantage of a [indiscernible] environment.
Let me enter into more details. First, looking at non-regulated activities in France. EBITDA was up nearly 70% to €6.3 billion, supported by four main drivers. First, generation, with an overall positive impact from higher nuclear and hydro outputs, estimated at over €1 billion. Nuclear output was up 14.1 terawatt hours to reach 393.2 terawatt hours. This reflects a normalization of operating conditions compared to 2017, which was penalized by outages triggered by the cause of four situation, the so-called carbon segregation issue, in addition to the temporary outages at the four Tricastin reactors.
Hydro output grew 25.4% to 46.5 terawatt hours, very favorable Hydro conditions during the first half of the year, combined with a strong internal performance in terms of availability rate of the hydro fleet are driving this evolution. Second item, a supportive wholesale market environment. The improvement is attributable, both to purchases and sales on the power wholesale market.
First, let me remind you that 2017 had been heavily hit by the high [indiscernible] costs on the wholesale market in the context of reduced availability of the French nuclear fleet in order to meet the request of RN volumes. On the other hand, 2018 sales on the wholesale market benefited from higher prices. The estimated combined effect on 2018 EBITDA is €413 million compared to 2017. The third driver relates to downstream margins. Positive impact of higher markup rates market pricing and market-based supply contracts more than offset market share erosion. The net impact is a positive €150 million.
Fourth factor, the rollout of our performance plan in French generation supply activities, which delivered a further €313 million in OpEx savings as detailed earlier. To conclude the review of EBITDA evolution on this segment, let me highlight a couple of additional points. The evolution in tariffs, excluding the effect of energy savings certificates, carried a €152 million negative impact. This negative effect is attributable to the end of the tariff catch-up component, which was still in our 2017 numbers. It also reflects a negative price effect resulting from the lag included in the tariff methodology. The last block at the right-hand side of the chart reflects various effects, part of them being related to value-added taxes and [indiscernible] being non-recurring items.
I just commented nuclear output in 2018, which increased by 14.1 terawatt hours compared to 2018, and that regards hydro generation trends. They were very strong in H1 2018, while the second semester was much drier.
Moving now to regulated activities in France. EBITDA in the segment is broadly flat at €4.9 billion. First, positive impact of the tariffs changes under the Turpe framework amounted to an estimated €68 million. And it has also delivered an increased activity in grid connections, delivered presence €77 million positive. In addition, OpEx decreased by €38 million compared to 2017. Finally, this positive were partly offset by a one-off provision related to the risk of change in energies and electricity contributions through the electricity front for the period 2012 to 2018.
Moving to EDF renewables, whose EBITDA was up 4% organically to €856 million, this reflects the good operating performance of EDF renewables generation fleet. Output stood at 15.2 terawatt hours in 2018, up nearly 15% in organic terms. As a consequence, EBITDA from generation activities grew accordingly to €903 million. This improvement is mainly attributable to capacity commissioned in 2017, some of which were formed in 2018.
In this respect, the above-mentioned level of production may not fully replicate in 2019. Coming to the capacity development. Growth capacities commissioned by EDF renewables in 2018 amounted to 1.6 gigawatts, including 0.9 gigawatt in solar power. At the end of 2018, net installed capacity was up 0.5 gigawatt compared to the end of December 2017, and stood at 8.3 gigawatts.
Gross portfolio of projects under construction is also growing by 0.5 gigawatt to 2.4 gigawatt. All these indicators reflect the high development activities, which translates into higher development costs as well. Conversely, EDF renewables DSSA business contribution was slightly lower. Looking now at renewable activities across the group. Overall EBITDA grew by 35%, thanks to strong increase in French hydro generation in addition to commissioning and acquisitions made in 2018 in onshore wind and solar. Including investment in the hydro fleet, net investments amounted to €1.2 billion.
And 2018 was marked by important acquisitions in the offshore wind segment. First, in May, the LNG project in Scotland, which is fully permitted and contracted with contractual difference over 50 years. And second, the acquisition in December of development rights for future projects on the coast of New Jersey. These developments were financed by the sell-down of 49% of the group’s wind assets in the UK under very satisfactory conditions, but with no EBITDA impact as the group retains control on the portfolio. Coming now to energy services. EBITDA at Dalkia came to €292 million, up 25% in organic terms. Enhanced efficiency from the performance plan was the main driver of EBITDA growth. 2018 EBITDA improvement is also attributable to a 2017 negative one-off, which had created a temporary headwind. Dalkia continues to be successful on the commercial front in its core activities of renewable heating networks and energy efficiency contracts in France. Group energy services benefit, in addition, from international expansion in Italy, in Belgium and in the United Kingdom, so impact the project acquired in 2017.
As regards Framatome, EBITDA reached €465 million in 2018, its contribution to group EBITDA stood at €202million. This reflects the successful integration of Framatome within EDF. Indeed, a significant portion of Framatome business is realized with EDF, in connection with supply of fuel and services to the installed base and to projects in new nuclear. EBITDA benefited, in particular, from the continuation of the operational and structural cost production plan, which is progressing as expected. On the commercial front, 2018 was a solid year, with the order intake reaching €3 billion out of which 60% with non-EDF customers. Framatome registered a good level of activity in the fuel business with notable achievements in 2018. Thanks to the purchase of Schneider Electric’s nuclear implementation and control offering in North America in February 2018, Framatome is expanding its engineering expertise and broadening its portfolio of I&C solutions. On the other hand, the installed base business has experienced a slight slowdown, in particular, in the United States. Looking now at the UK segment. In organic terms, EBITDA was down 15% to €783 million. This evolution was mainly driven by nuclear generation, which was hit both by lower output volumes and a decline in net realized prices. UK nuclear output stood at 59.1 terawatt hours, indeed down $.8 terawatt hours compared to 2017, in relation to the Hunterston B inspection and to Dungeness outage extension. This lower fleet availability, combined with lower hedged prices, triggered buybacks under wholesale market in the context of higher prices. Supply activities helped mitigate those negative factors to some extent, increasing tariffs had actually higher positive effect than the residential portfolio decline of 4.2%. In Italy, 2018 EBITDA reached €791 million, down 12.7% in organic terms. But this change in EBITDA mainly reflects a 2017 one-off capital gain on the disposal of Edison’s headquarters with no equivalent in 2018.
Performance in power activities was up €35 million, lifted by strong hydro and thermal output, in addition to high level of ancillary services. These positive drivers were partly mitigated by negative price and volume effects in wind generation. Conversely, B2B retail business has slightly improved despite margin pressure in the context of fierce competition. Gas activities were down €76 million, mainly due to the unfavorable price effects affecting the margin of long-term contracts. Lastly, E&P, expiration and production, activity benefited from positive price and volume effects, related to the increase in Brent price on the one hand and to the commissioning of a new field of operation in Algeria on the other head.
Looking now at the international businesses. EBITDA in the Other International segment was down organically 3% to €240 million. In Belgium, EBITDA decreased by 5% in organic terms, the slight decline reflects the impact of the extending – extended outages at nuclear plants operated by the Engie group. This large negative was partly mitigated by higher summer and renewable output and by growth in service activities. In this respect, it is worth mentioning that EDF Luminus was, in 2018, the first onshore wind player in Belgium with 440 megawatts, representing 20% market share.
Brazil was penalized by planned outages and unplanned interruption in gas supply with both triggered buybacks on the market in order to meet PPA obligations. And as you know, the sale of EDF Polska assets was completed end of 2017. So as a whole, these figures do not pay tribute to the strong development of our international business, in consistency with our CAP 2017 strategy. Lastly, the other activities segment.
EBITDA in the segment was up 62 organically to €858 million. This was mainly driven by EDF Trading, whose EBITDA grew 73% to €633 million. EDF Trading’s activity was boosted by higher market volatility on commodities, such as coal and CO2, and by favorable weather conditions, especially in Europe. LNG activities also posted significant gains, benefiting from the continued divergence between Asian LNG and European gas prices in 2018.
This segment also includes capital gains on real estate disposals. In 2018, we completed the last tranche of the real estate disposal program with a significant capital gain. Let’s now move to other items of the P&L. Starting with EBIT, which is down 6% at €5.3 billion. First point 2017 capital gain on the 49.9% of CTE disposal had no equivalent in 2018.
And second point, some increase in D&A, which come mainly from a volume effect in the French nuclear fleet maintenance in the context of the [Foreign Language] and from the integration of Framatome activities in 2018. Net income group share came to €1.2 billion versus €3.2 billion in 2017. Net income was penalized by the French result which deteriorated by €2.6 billion compared to 2017, in particular, in connection with the evolution of French markets. I will detail that on the next slide. Two main supporting factors that partly offset this trend. First, improvement of income tax by nearly €300 million, at €149 million, mostly as a consequence, on – of the lower profit before tax, in connection with the large financial charge to the P&L. Improvement of income from associates by €200 million year-on-year, at €734 million, mainly driven by the €491 million impairment that had been recorded in 2017 on CNG assets with no equivalent in 2018.
Lastly, when excluding non-recurring items, recurring net income comes to €2.5 billion. Let’s now focus on the change in financial results. First, a continued proactive debt management helped yield a further drop in financial costs because it is important. Taking into account the senior bond debt of USD 3.75 million that we successfully raised in September 2018, [indiscernible] at 2.87% end of 2018 while maintaining the average maturity of gross debt at more than 13 years.
Second point, which is expected – which was expected, which was the 20 bps decrease over 2018 in nuclear provision discount rate in France versus a reduction of only 10 bps in 2017, which resulted in a €455 million increase in discounting costs. The most important and unpredictable element is the fair value adjustment of debt and equity assets under IFRS 9, which carried a large negative impact at the end of 2018, in the context of adverse market conditions, while the group had recorded significant capital gains within the portfolio of dedicated assets in 2017. This change in accounting norms, combined with adverse market conditions , represents an additional €2 billion negative. As a matter of fact, financial results is more IFRS 9.
As an illustration, fair value adjustment of debt and equity assets in January 2019 is positive and offset the 2018 negative. And once more, this has no impact on the net recurring rate income. Just a quick word. On the past tax effects of non-recurring items. In 2018, they stood at a negative €1.3 billion versus a positive €253 million in 2017. Impairment proceeds have been recorded on some specific assets for a total amount of €498 million, which is significantly below 2017 level. However, this does not offset the fact that 2017 benefited from the €1.3 billion capital gain on the RTE transaction.
Net changes in fair value, both on financial assets and on energy committee derivatives, excluding trading activities are accounted for in non-recurring income. Looking now at the first part of the cash flow. Operating cash flow stood at €12.9 billion, up €2.7 billion from 2017, in line with the EBITDA trend. Three main drivers here. First, the significant EBITDA growth and the improvement in quality of earnings with non-cash elements being significantly reduced. Second, tax disbursements were much lower in connection with the decline in the group’s taxable income in France. Third, are the lower financial expenses disbursed linked to the decline in interest charges on financing activities, as mentioned above. Cash flow after net investments and change in working capital requirement came to €1.3 billion, down €0.6 billion versus 2017.
Two main drivers. First, the change in working capital requirement, which still brings a positive contribution, but a lower one than in 2017. This positive contribution in 2018 is linked to continued efforts on working capital optimization. And in 2018, it benefited from the one-off cash in related to 2016 tariff adjustment. Second point, total net investments and acquisitions, excluding the group’s asset disposal plan, reached €14 billion, down 2 billion , which is explained, of course, by the acquisition of Framatome in 2017. But the amount of disposal was much lower in 2018 with only €1.9 billion proceeds, mainly in connection with Dunkirk LNG terminal and real estate assets disposal. On this slide, we shed some light on total net investments and acquisitions, excluding the group assets disposal program. The first thing to note here is that excluding the exceptional cash out associated with the acquisition of Framatome in 2017 for nearly €1.9 billion, net investments are broadly stable. The second thing to note is that the discipline on net investments, illustrated on the left-hand side on the bridge, has financed the natural increase in our strategic next developments such as Linky and HPC, and also selected acquisitions in retail and services in Italy.
This last slide on cash flow shows the €0.4 billion negative contribution of the dedicated assessments, which include the disbursement made to them in order to restate the regulatory requirements in terms of coverage ratio. After deducting the interest payments and hybrids and the share on the dividend paid in cash, group cash flow stood at negative €480 million. But most importantly, I want to highlight that cash flow, excluding Linky, new developments, group asset disposal plan in 2018, interim dividend is largely positive. This target set by the group four years ago has been delivered and even exceeded.
As a consequence group cash flow can nearly balanced after taking into account dividends, including the hybrid bonds remuneration, and investments in Linky and new developments, which were partly financed by the 2018 group’s assets disposal plan contribution. This triggered stabilization of the net financial debt at €33.4 billion. This ends my presentation. I thank you, I then now hand back over to Jean-Bernard.
Jean-Bernard Levy
Thank you, Xavier. So I will end this initial presentation by giving you some of our targets and ambitions for 2019 and 2020, and then we will leave you with a Q&A session, and hope you will have many questions. So the 2019 guidance and medium-term outlook is provided to you on this slide. Please note that all these figures are at constant accounting standards, but there are some changes, and you would find in the documents that are released, the effect of the accounting changes. So this, I am presenting, is at constant accounting standards. We are setting an EBITDA target in the range of €15.3 billion to €16 billion, we will continue to reduce our expenses, aiming a total of €1.1 billion of cost reductions when compared to what we had in 2015, and we are targeting a positive cash flow, excluding investment related to Linky and to Hinkley Point C.
As far as our ambitions for 2019 and 2020, our concern total net investment, excluding group acquisitions and disposal will amount to approximately €15 billion per year. Group disposals will be within a range of €2 billion to €3 billion over the period of 2019 and 2020. The net financial debt-to-EBITDA ratio will be less than or equal to €2.5 billion over the period, the dividend payout rate will reside within a range of 45% to 50%. The option to receive the payment of the dividend in new shares will be offered to all shareholders. Please note, that the French state has undertaken to opt for the script payment for the balance of the dividend due in 2019, and for the whole of the dividend due for 2020.
In addition to these financial prospects for the coming years, it is essential that we focus our efforts on structural factors, which will enable EDF to fulfill its role as a leader of the energy transition. So we will be focusing on three key dossiers, which have been determined by French President Emmanuel Marcon in his speech in November last year. At the same time, when he outlined the key principles of the PPE, the multi-annual energy program. The first of these key areas is regulation.
I have, many times, highlighted how the asymmetrical nature of the ARENH mechanism is unfair. The government has announced its intention to reform this mechanism in the address delivered by the French President, he stated that the challenge is to protect consumers from hikes in the price of electricity, but also give EDF the financial means it requires to deliver the goals of the PPE, and you have the quote on the slide.
The second key area relates to our organizational structure. The government has asked me to recommend how we could change the group’s organizational structure so that it is better suited to the scale of our investment and our industrial ambitions. These recommendations will be submitted by the end of 2019. One thing is already certain at this stage: EDF will remain an integrated group, but this does not prevent us from considering some structural changes.
I would like also to reassure all of our stakeholders, including our employees, of course, who will naturally be involved in these discussions through our [Foreign Language], let’s talk energy initiative, as we had used the same initiative in 2018. And our investors, to all of you, the legitimate interest must also be addressed when we think about some of these structural scenarios. The third key area as relates to the French nuclear new build. The government has directed the management of EDF to draw up a plan for the construction of new EPR reactors. We have started to prepare EPR two, which is the design of an optimized EPR, which can be developed together with Framatome and which – on which we have been working since 2015.
Such an industrial challenge of building new EPRs has, of course, many dimensions that need to be addressed. Legal, regulatory, pre-financing regulation and so on. We are working hard to ensure that indeed, we will be ready by the summer of 21 – of 2021 to provide the government with a very detailed plan so that the government will have all it needs to make a decision. So there are these key areas on top of our current operational performance that are on the agenda for the short and medium term. We obviously are very enthused by the period we are living, and we will live in the few – next few years. We know that the future will be electrical because it needs to be low carbon. And as individuals and as a team, we will bring all our energies into achieving our climate goals as well as our economic performance goal as we have always done.
So we have a slogan inside the company, and also inviting all of you to be part of this effort. Our new slogan is [Foreign Language], We have the power to change at all. Thank you for your attention. So this ends our initial presentation, and we will now turn to questions. There is a microphone or two in the room, so please.
Question-and-Answer Session
Q – Unidentified Analyst
[Foreign Language] Maybe you want to turn into English?
Xavier Girre
Yes, yes, yes, sure, sure. As regards to 2019 guidance, I mean, we have – so we have given guidance, which reflects the fact that we are very confident in our ability to increase EBITDA once more in 2019, after its very strong rebound in 2018. With positive impacts of the price, we expect significant impact, positive of the price, both in France, and to a certain extent, in UK. On the other hand, we have taken into consideration, and the fact that in the UK, we have set a cap on the SVT, which is a negative one, of course.
Some uncertainties about the capacity mechanism in UK. And when you compare also 2018 versus 2019, we had two positive impacts in 2018 that we have not, for the time being, included in our guidance, which is the hydro, which is beyond a normal year. And trading, EDF Trading, which was very strong in 2018. So this is why we’ve given this guidance which, once more, is, as far as we are concerned, a signal of our confidence for 2019 and our ability to deliver another growth of the EBITDA in 2019.
Jean-Bernard Levy
And regarding the second part of your question, what is a good framework? What – it is very early to give any details, I think what is a good framework is something that would work. What we are obviously expecting at this stage is that it is not straightforward, considering our existing debt, considering the competition that we have to live through, considering the regulation that has been put in place within the European directives, it is not obvious to find the right solution in order to build EPRs with a 60-year lifetime, a 10-year construction time, another 20 years for the deconstruction, and so on. We have found some solutions within the EU system for Hinkley Point, but we have seen that this solution brings a lot of debt during the construction period to EDF. We are, right now, building up on our balance sheet, a significant amount of money, for which we will have very good returns, but not now.
In 2026 and into 2016, 2018, 2019, I don’t know. But this doesn’t fit with a large program for building more EPRs. We have to find more innovative ways of doing that. So it is doable because we have seen with Hinkley that we can build nuclear reactors. We have seen other nuclear reactor construction decisions being made elsewhere within the EU, and so we will have to work on how we can do that without jeopardizing the balance sheet of EDF, and while we keep our ability to innovate and to serve our clients. So this is exactly what we have to do for the next, let’s say, 10 months because we have to provide the government with new regulation and organization prospect that will include, of course, a new nuclear build for France by the end of the year, and then we’ll have to have a more detailed dossier for an investment decision to be ready in about 2.5 years.
Vincent Ayral
Vincent Ayral from JPMorgan. A fairly similar question just for the existing nuclear fleet, say a new regulation would be – is being worked on, can we expect something like wrap-based type of regulation, what type of framework do you personally prefer regarding the existing fleet? That would be number one. Going with this, we have the restructuring of EDF, you’ve been asked to look at this.
There had been some articles talking about a potential nationalization, do you believe that EDF is best listed or not, or just splitting the nuclear in a separate entity within EDF Group, and remaining listed is a preferred option from an EDF point of view? Obviously, you cannot speak for the government here. And all of this need approval from the European Commission, and potentially, [indiscernible] are the discussion already started in the background? What are your key arguments on this? Thank you very much.
Jean-Bernard Levy
On the existing nuclear system, President Macron, I think, was very clear to say that we need to find a way by which customers are protecting when prices are very high, when EDF is protected when prices are very low, which is not at all the case right now. As we all know, we have difficult times when the prices were in the €30s, for the wholesale €30 per megawatt hour for the wholesale price recently. And obviously, as I have said, the asymmetry of the current regulation is something that we could understand when our competitors were just emerging, we are just starting, but we have very large competitors that are, obviously, making a lot of money, a lot of returns, and we have seen very expensive transactions on the market.
So we absolutely need to find a regulation where asymmetry is behind, and we go to a symmetrical and fair situation. We consider, after 10 years, that it is unfair that we remain in an asymmetrical situation. So this is the, I would say, the framework within which we will support the government in its discussions with Brussels because the government is in charge of regulation, and we can try to provide the governments with our best arguments in order to achieve what Emmanuel Marcon was saying about revisiting this regulatory situation.
On the nationalization items, I guess, this is the first time I am getting the question, but not the last time. So I really want to say something, which I can repeat for the next 100 times I will be asked the question, and we do not have any view on this matter. It is up to the government and to parliament, you cannot nationalize without going through legislation, that have to discuss the pros and cons on various scenarios regarding EDF ownership and EDF structure, and I will not make any further comments on this matter.
Emmanuel Turpin
Good morning. Emmanuel Turpin, Societe Generale. I would like to come back on the first question on the underlying assumptions for the 2019 guidance. You gave a couple of pointers, specifically on the UK capacity payment, there is uncertainty. Does it mean that in your guidance that there is zero for 2019? For the French retail tariffs, the regulator has given a proposal, this is public information, do you include this proposal in your budget?
And every year, when you look at the bridge from the past year to the current year, we’ve got a number of elements that do not recur, right? You mentioned, for this time around, the hydro production, which is totally operating but high. Are there any other kind of financial one-off items in 2018 that help us understand the 2019, which is slightly below what everybody was expecting?
On last point, on 2019, my understanding is that this guidance is, as Jean-Bernard Levy said, at current accounting standard, so we need to adjust our numbers by IFRS16. We need to add €700 million of EBITDA, is that right? Is it broadly neutral at the net earnings on how much debt does it add on the balance sheet?
And finally, to finish my thorough job, is a bridge between EBITDA on net earnings for 2019, could you give us a couple of pointers at the D&A on the gross cost of debt level, D&A, we should expect an increase versus 2018, the same amount as we had versus 2017 and should we keep gross debt, cost of debt flattish? And as a bonus, if you had any comment on the level of consensus for 2019, which is at about 2.6, 2.7, that would be great. Thank you.
Xavier Girre
Thank you for these questions. I guess they are for me.
Jean-Bernard Levy
But you can answer quickly, no? Yes.
Xavier Girre
So as regards the guidance for 2019, the EBITDA guidance. So, well, hypothesis is that the capacity mechanism will be reestablished in UK We have taken, as a hypothesis, 1st of July meaning, so we have taken a 50% impact for 2019. Second point, as regard the tariffs in France. We have taken the, as a hypothesis, the proposal made by the CRE. As regards one-offs in 2018, I think I have already explained some of them. I also explained that we had some capital gain, and due to our disposal in real estate, for example.
So I think this clarifies our guidance. And once more, definitely we are committed to improve significantly the EBITDA in 2019, very confident to go on due to the price increase, due to our strong performance in operations. So secondly, as regards – sorry, it has come back. As regards to the IFRS 16 impact, yes, you’re right, I mean, the impact on the EBITDA is more or less €700 million for 2019. We have put it here on the screen because, as you know, I mean, in the IFRS 16 frame, so we have, from now on an asset, right of use at the balance sheet and the debt, and so no longer on your rent, so this improves the EBITDA.
Then we have, of course, say, to take into consideration the financial interest due to the debt. This means this, the slight difference between the impact on the EBITDA and the impact on the cash flow, which is [indiscernible], we have estimated it at €640 million. And as regards, the impact on the net financial debt-to-EBITDA ratio, we have estimated it at more or less, 0.2. As regards 2019, as regards our D&As, we do not have significant changes to – in mind for 2019.
The D&A should increase regularly, as they do, due to the fact that we, of course, continue to invest and develop the [indiscernible] and other assets. As regards of the cost of debt, there is no reason to change it. As I said, we, once more, made very positive and proactive debt management in 2018, which has enabled us to reduce, slightly, our cost of debt to 2.87%, keeping a very strong maturity, more than 17 years. So this is, more or less, what we have in mind. And as you know,, I mean, usually so our D&As increase more or less by €500 million. So no change this trend, I guess, in your analysis. Thank you.
Vincent Ayral
Vincent Ayral from JPMorgan, again. One point missing here is understanding, whether what is the assumption you take on the regulated tariff increase, which was proposed by the crew, it’s quite material, especially when the guidance is about, I would say, €300 million to €500 million below market expectations? So that leads to my second question.
If it’s not explained by the assumption on the tariff increase, do you protect profitability on all what is exposed to market? So new offers. You could consider yourself if the nuclear gets related as an opportune operator over there, and decide to not compete outside the tariffs in order to protect value until the current regulation can take another year to come and it’s missed opportunity offering towards ARENH in the meantime, which could cost more than the value of customer, what is your view on this? Thank you.
Jean-Bernard Levy
Our view is to address our clients with what they need, and we believe that the regulated tariff is what they need for many of them, but not all. So this is why we have been defending the – that we could keep the regulated tariff within the French legal case that was brought to [indiscernible] over the years, and we have been successful in that, and that we have also requested that we can keep our regulated tariffs within the European time frame.
And while it’s not totally finalized, we expect that the new Winter package, as it’s used to be called, will include four countries who decide to do so, that there is a possibility to keep the regulated tariffs. But we do not consider this, is in a position to address all the market, and this is why two years ago, we crossed the river from the regulated world to the non-regulated world, and we have started to sell some non-regulated offers with the new packages that we have been offering.
And as I said, [indiscernible] for instance, is very successful package, which means that while we’ll still have millions and millions and millions of clients with regulated tariffs, we are now building a significant base of customers with other kinds of tariffs, and this is a very clear strategy that we intend to implement over time so that we can address the needs of our clients in the broader possible way.
Vincent Ayral
Okay. Can I come back, sorry. Can I just come back on your, bouncing off Emmanuel’s investments questions, third attempt? On Xavier’s question, in terms of retail, what is reasonable to assume for 2019 regarding number of customers and tariff increase has been all [indiscernible] this week about a tariff increase, where the government is going to ask you to do, what the CRE is asking, et cetera, et cetera, so.
Jean-Bernard Levy
We have made very clear that we have embedded in our guidance that the current recommendation will be followed by the government. I think Xavier said it clearly. I’m not very sure I don’t understand why you are saying we didn’t answer.
Vincent Ayral
Okay. No, it’s not what I said. I’m just trying to get more details. The second question is the number of customers, what is reasonable to assume for this year in terms of potential loss of customers or getting of customers considering the economics have changed a lot for your competitors?
Jean-Bernard Levy
We are not releasing numbers for market share expectations.
Louis Boujard
Louis Boujard from ODDO BHF. Just wanted to, coming back a little bit on 2019 figures, more particularly on the net income and the financial cost of debt. What do you expect in terms of discount expenses for 2019 in comparison to 2018? Because the race – partly because of this discount expense increased this year, what should we expect for 2019 figures?
Secondly you mentioned in your comments regarding that heavier entry point, is that you might eventually think about a way to lower the cost of debt related to this project, does it mean that you would be, A, that you would think about eventually opening the shareholding structure at a later time in the next years for Hinkley Point, in order to enable an equity method accounting for these assets? And lastly, could you please give us a quick update regarding Flamanville at this stage, if possible? Thank you very much.
Xavier Girre
Maybe I can answer the first question about the [indiscernible] charge. I mean, I were – our hypothesis as regards to discount rate is that it will be 3.8% for 2019. Of course, it’s a hypothesis, and it’s what we have built in, in our figures and guidance. And as usual, so you have in the appendices all the explanations.
So here, we just explained the mechanism. And maybe we have another slide, which can show you a sort of sensitivity, meaning that a decrease of 20 bps, which will not be the case, because you understand, we – so we expect a 10 bp decrease, but we have the slide please, it means a 20% decrease, which shows that the impact on the provision is more or less €1.5 billion, with half of it on the balance sheet and profit on the P&L.
So here you have it, not this one. The impact of – so you will see that in the appendix. And so, as regards very precisely 2019, so a 3.8% versus 3.9% at the end of 2019. So it means that this should have a positive impact on our financial result, because the decrease will be slower in 2019 than in 2019. On the other hand, it’s an increase of the provisions.
Jean-Bernard Levy
So regarding your question on the way we finance Hinkley Point, we decided, back in 2015, if I am not mistaken, or 2016, to build Hinkley Point through debt, which is borne by EDF Group’s balance sheet, in what we call the consolidated model. We made that decision after we had for several years envisaged to hold less than 50% of Hinkley Point and to have what we would call a de-consolidated model. We finally decided not to go through that de-consolidated way because it created a lot of legal and financial hurdles, which we could not overcome, so we do not intend to go back to a situation where the financing of Hinkley Point would be done through a non-consolidated company.
Xavier Girre
Maybe some questions from the phone? I already got one, maybe I could give the question and the answer, and of course, we’ll take some others. We got to question from Hammett Thalmann, who says, so that we have announced that this program’s quick commitment from government is back, should we see this as signs of concern by management on the balance sheet, and which assets do you plan to dispose?
So, of course, it’s a quick question, and it’s the logic of what’s currently being done. I mean, so the decision by the state to upgrade dividend, will indeed to bring some support to the balance sheet. While asset disposal, will help finance our CapEx program, that remains heavy, as you know. And the decision of the state is also a sign of confidence and support to our strategy. There is no concern on our balance sheet asset.
But as we explained, as long as the fundamental issue of asymmetric regulation, and Jean-Bernard Levy highlighted this point, is not addressed, we will need to remain vigilant. And to be very specific on the question of the assets we might dispose of, as you know, we do not give any commitment – comments about any options of disposals, but we believe there is still some room to further streamline and focus the group on key priorities and business lines. So this is what we are doing in the years to come.
Jean-Bernard Levy
Okay. We have any other questions from the phone?
Operator
The first question comes from the line of Ajay Patel from Goldman Sachs. Please go ahead. Your line is now open.
Ajay Patel
Good morning. I just have two questions, please. Firstly, on IFRS 16. Does that impact the net income, excluding non-recurring items, i.e., are the impairment expenses stripped up in that representation or not? And then the second question is, do you have any rough guidance for the UK nuclear for 2019, so we just get an idea of what’s embedded in the numbers? Thanks.
Xavier Girre
As regards the net income, there is no impact on the IFRS 16 on the net income. Yes, you want to? So as regards the generation, the nuclear generation, in UK, we gave no guidance. As you know, we have [indiscernible] generators had been stopped, which is, of course, a concern, but we give no specific guidance for the UK on nuclear generation.
Ajay Patel
Thank you.
Jean-Bernard Levy
Okay. Maybe we carry on with questions from the phone, if there are any, please?
Operator
Thank you. Your next question comes from the line of Sam Arie from UBS. Please go ahead. Your line is now open.
Sam Arie
Thank you very much. Good morning, everybody thank you for the presentation. And congratulations on the good result for 2018. I think the questions we had on guidance and so on has been covered already. So I’d just like to ask you about, actually, your EDF renewables business, and I think you said today that you commissioned 1.6 gigawatts last year of growth. And I’m just interested in kind of where that number could go to?
Obviously, your solar plants at 2030 implies, I guess, two or three gigawatts per annum just on solar, you’ve got off-shoring coming onshore. When you add it all up, I wonder if you’re heading to a sort of four or five gigawatts annual growth requirement? And then I’m just interested if operationally, you think you can deliver that with the current organization? And if financially, you are comfortable that the balance sheet could support that level of growth?
And if not, then I suppose, coming back to this restructuring topic that you’ve talked about, obviously, one priority is to address the price risk of our nuclear, which you mentioned. But can I ask, if another priority in that restructuring thinking that you’re going through, has had to recap its alliance of renewables business for a level of growth that may be three times or four times higher than even the high level that you’ve delivered in 2018? Thank you.
Jean-Bernard Levy
So on renewables. We expect that we will ramp up in phases, and we expect – basically, we really accelerated back in like 2016, we expect 2019 to look like 2018, and I will not give numbers, I will just remain, very general terms. The solar plan we want to grow is also going to ramp up, and we will not, all of a sudden, start building every year the two gigawatts that will lead us to achieve the solar plan objective of 30 gigawatts by 2035.
We have, maybe you have seen that, acquired a company with, as I said, one gigawatt of development capacity, which, over time, will help us accelerate in the solar plan. But what I want to say very clearly in terms of strategy is that we are very determined in the current organization of EDF’s assets to find sufficient resources, to build our renewables portfolio to the level that we had considered in CAP 2030.
And now, I’m talking CAP 2030, which is globally, to build up to 50 gigawatt of renewable portfolio by 2030, we are keeping this objective, which of course, includes hydro, as we always said, it does include hydro. And then we intend to build our – to build a plan of 30 gigawatts in – of solar in France by 2035, but some of that may be consolidated, deconsolidated and so on.
What I want to say is that when we, in due course, we’ll discuss with the government about the way we work on reorganizing assets and things like this, it is, I think, absolutely obvious from – on both sites, whether it’s the state, whether it is ourselves, but by no way we will jeopardize our renewables, long-term objectives. We want to rebalance our low carbon assets between nuclear and renewables.
And while we have to be prepared, that there will be less nuclear in France because that is the law, the law will be in the 50% mark will be in 2035, not in 2025, but still, it’s the law to go down to 50%, we need to expand vary significantly our renewable portfolio, and we will do that whether it is in the current structure or whether it is in any new potential structure, which may happen or maybe will not happen, but in no way will we jeopardize this very strategic objective of rebalancing nuclear and renewables. Any more questions from the phone, or maybe a couple of last questions from the phone or maybe the web, please?
Operator
Our final question from the phone lines comes from Olivier Van Doosselaere from Exane. Please go ahead. Your line is now open.
Olivier Van Doosselaere
Yes, good morning everyone. Thank you very much for the presentation and for taking our questions. I have two. The first one is a topic I know you’ve already spoken three times or four times about, that’s why, apologies for the repetition. But you mentioned that in 2018, there had been some negative impact on the EBITDA from the lag effect of the tariff methodology in France, I was wondering mentioned that you assume that the CRE’s recommendation of tariff gets implemented as part of your guidance, but we are now in mid-February, there is an expectation that the government will wait a bit before validating the proposal and so the tariff increase might maybe only implemented in May or June.
Now the CRE has said that if the tariff increase is implemented rapidly, you would be entitled to a catch-up. So I guess my question will be, what is your assumption in terms of timing of tariff increase or in potential subsequent catch up, would the effect of the assumption be that the tariff increase, the effect would have implemented from the start of the year or that you only assume a tariff increase impact from May or June without any catch-up? That’s the first question.
And the second on regulation, you stress quite strongly the fact that will not to be able to address the problem of the asymmetry of the ARENH regulation, so I wonder, will your discussions with the government mainly be about taking away the option for alternative suppliers to be able to purchase electricity below the ARENH price if all the prices drop to those levels? Would you also expect to have some discussions about the actual absolute price of ARENH. And then your second point on regulation also, ARENH is supposed to be a temporary mechanism lasting until 2025, do you see at a European level, openness to actually have that mechanism be extended? Thank you very much.
Jean-Bernard Levy
Okay. So first, on the price increase. As we have said, we have indeed embedded in our guidance the CRE recommendation, which is very detailed and leads to 5.9%, including VAT and so on, increase by June 1. So this is what we have in our numbers, because this is what is implied by the most recent statements made by the ministers in the government. The potential catch-up that would be the, I will say, second level effect of having done it in June and not early in the year is something that is, of course, much less significant, and we don’t know when that would happen, so we have not embedded anything related to that concept of the catch-up, which will indeed one day, be materialized, but within a new calculation of what the tariff like.
Regarding your second question, we are not expecting, at this stage, to – when – what we do not have at this stage, any more details on what I said regarding the end of a certain asymmetry. There is something in your question I do not fully understand. Today, when the price of ARENH is not met on the market, our competitors, of course, won’t buy from ARENH, they buy from lower. So we don’t even get the benefits of being protected at ARENH price, and this is something which we have been very vocal about for many years, and we hope that there will be an end to this as asymmetrical situation. So I think we may have time for one last question from the floor, and then I think we will have to end that session. So if there is one last question from the floor? I think you have a microphone?
Vincent Ayral
Vincent Ayral, JPMorgan again. So on coming back in one point. I mean, it may not be relevant when the nuclear is regulated but so far, EDF is quite subject to market price movement. Power prices have increased very materially, recently, and I think that’s surprise we have today over guidance, which is potentially below expectations. So what I understand if it can be seen as a slightly conservative in the current environment certainties, just to understand basically what are the key areas where you’ve taken conservative assumptions, just that would be very good. Thank you.
Jean-Bernard Levy
So I think we have given you a lot of details about what we had in the 2018 EBITDA and what we see in the 2019 guidance and the pluses and the minuses that I’m sure, you can all have in mind and I won’t make any more comments on this, so obviously, we have explained that there was some positive items in 2018 that may not find – that we may not find again in 2019, and on the other side, as we said, our average selling price in 2019 with our hedging policy and whatever, will be above what it was in 2018.
So there are some pluses and minuses, but the pluses are above the minuses, and this is why. The bottom part of the range for EBITDA in 2019 is above, slightly above, what we have achieved in 2018. So there is, in our guidance, a growth in EBITDA, even if it is a very slight growth if you look at the bottom of range, it is more significant, if you look at the top of the range.
And I would just end my answer by telling you that we believe very strongly that the guidance is there to be met.
Jean-Bernard Levy
Thank you. I think this ends our session. I want to thank all the listeners, our viewers from the outside of this room, and all those who are present for the very nice attendance. Thank you.
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