Performance Report 2005
Shareholder
2005 was marked by continuing growth and a strong operational performance, despite a context of extreme volatility in energy markets.
We made synergy savings of more than £32m in the year (£180m achieved since 2002).
Further optimisation of our property strategy yielded £27m of profits from disposals (£110m since 2002).
Networks Branch – recorded £27m in operational and capital expenditure savings.
Energy Branch – Energy costs for our customers were controlled through our vertically integrated structure and synergies with EDF Trading. We were therefore able to limit the rise in energy costs to 29% compared to a year on year market rise of 90% in gas and 100% in electricity.
Customers Branch – Despite the highly competitive market, customer product numbers increased to 5.1 million, a net gain of 181,000 in the year. Our major supply business was ranked, by Datamonitor, as the largest supplier in the UK for the first time on the back of a 4% increase in volumes. This was achieved under a unified EDF Energy brand.
Development Branch – Our private networks business confirmed itself with a 23% increase in turnover and the award of new projects including Ealing Highway Lighting.
In 2005 EDF, our parent company, published its business plan detailing the key areas of investment required over the coming years to upgrade and replace the electrical infrastructure that EDF operates from generation through to distribution and supply. This investment is a vital part of what is needed to meet societ's energy demands. The billions of euro investment required to meet the business plan necessitates access to capital from the financial markets.
The French Government took the decision to open the capital of EDF by an Initial Public Offering (IPO) which meant EDF shareswere listed on the stock exchange for the first time. The IPO took place on the 21 November 2005 raising 6.2 billion euro. This amounted to approximately 15% of EDF's capital. The cash raised through the IPO has been provided to EDF to fund the business plan.
Ofgem's review of the distribution price controls came into effect on April 1, 2005. The process of the distribution price control review involved meetings between EDF Energy and Ofgem and its advisors, as well as responses to public consultations. Ofgem published its final proposals in November 2004, which EDF Energy accepted in 2005. Key issues for the review included the level of capital expenditure for the current 2005-2010 five-year period, the efficient level of operating expenditure, further productivity improvements to be expected and the remuneration of the asset base.
This tariff review is considered, on the whole, to be satisfactory by EDF Energy. It made provision for:
However, Ofgem set the allowed operating expenses at a level lower than that of the previous tariff review period. To address this the Company has initiated a significant cost reduction programme.
EDF Energy believes a diverse and sustainable energy mix is crucial to ensure security of supply, address climate change and to provide competitively-priced electricity for customers. Across the UK, a diversity of fuel sources is vital to ensure a sustainable balanced portfolio of power generation assets encompassing all forms of energy and fuel types including gas, nuclear, clean coal and renewables.
We source the energy we provide to our customers from a range of suppliers including our own coal and gas power stations, long term purchase agreements and from the wholesale market. In October 2005, we produced our first fuel label that outlines information on the mix of the generation sources of the electricity provided to our customers.
EDF Energy's buys and sells residual power and purchases gas and coal on the wholesale markets to fulfil the needs of its generating plants and customers. The company ensures that its generation and wholesale market activities are optimized in order that energy is provided for sale to customers at competitive prices.
2007 TARGET |
Increase the value of the business by 15% |