We are working to give back to society, share the value we create and help to grow the economy we all depend on. We provide an essential service to society and it’s important that we do this in a responsible way. We want to be a better kind of energy company – one that thinks long-term and does business fairly and openly. That is why our ambition is to achieve a strong financial and ethical performance. We have made this central to how we do business.
This ambition also has a focus on transparency and honesty across our financial activities and performance. We are bearing down on costs across our operations, investing our profits wisely and managing our taxes responsibly, to ensure our customers get value for money. We are also contributing to the UK as a whole by paying our taxes, creating jobs and investing in the low carbon energy supply and infrastructure that will serve the country for years to come.
All our people work to our guiding principles for ethical behaviour and our business values. We regularly communicate these in lots of different ways. We also give our people the tools to work in an honest and ethical way and the confidence and processes to report any instances where we suspect we have not.
Our vision for EDF Energy for 2030 will see us invest significantly to deliver reliable low-carbon energy for the future of the UK. To fund those investments we need to have money to invest from our operations today. This is what we mean by living within our means.
This is an exciting time for the energy industry and we want to be at its forefront. If we’re going to compete in this new energy world, we must invest in jobs and skills for the long-term and continuously adapt through innovation and R&D. To do this, we believe it is important to bear down on cost in all of our operations. Being efficient helps us be more agile and set a platform for a bright future.
Because we measure our success on our ability to build a long-term sustainable and responsible business, our financial goals tend to remain the same year on year. They are to:
- challenge costs across our operations
- achieve long-term returns on capital which are at least in line with our cost of capital
- invest our profits to benefit our customers, our people and our business, while striving to have a positive free cash flow
How are we doing
Our earnings before interest, tax, depreciation and amortisation (EBITDA) were £1,399 million in 2016. In 2015, the figure was £1,624 million. This means our EBITDA was down 14% in 2016. We did better than our budget, thanks to our operations having a successful year. Still, we are operating in a difficult market.
Lower wholesale prices meant that our operating profit (EBIT) in 2016 was £470 million – 29% lower than in 2015 (£664 million). We reinvested much of this profit back into the business. Our total investment in existing nuclear, coal, renewables and customers was £675 million in 2016. We also invested £860 million in new nuclear.
The output of our nuclear power stations in 2016 was 65.1 terawatt-hours (TWh), an increase of 4.5TWh from the previous year. This is our greatest success since 2003, made possible by our commitment to investing in our existing power stations.
Although there has been a period of depressed prices, the Carbon Price Floor and Capacity Market gave us the confidence to extend the operating lives of our nuclear power stations, providing the UK with reliable, low carbon electricity.
We are always reducing costs wherever we can and this helped us meet our budget target again in 2016. Nonetheless, we will keep prioritising cost control and how we invest in our business in the future.
At EDF Energy, we rely on our local communities for our success and licence to operate, we give back to society by sharing the value that we create and helping to grow the economy we all depend on.
As Britain’s biggest generator of, and investor in, low-carbon electricity we are helping to build Britain’s industrial strength. This has a long-lasting impact on jobs and skills. By providing safe, reliable and affordable low-carbon energy, we play a key role in building a more successful, confident, outward-looking Britain.
Our programmes at Hinkley Point C
The construction of Hinkley Point C (HPC), our new nuclear power station, will create 25,000 job opportunities on site alone and will support 900 direct jobs during its 60-year lifetime. The project is also planning to take on 1,000 apprentices.
We continue to invest in skills and training programmes, and are working with Jobcentre Plus to match people to job opportunities and get people working at our HPC site.
GROWING THE LOCAL ECONOMY
This power station will contribute £4 billion to the regional economy; about £1.5 billion during construction and around another £2.4 billion during operations.
Overall, it will add £200 million a year to the local economy throughout its construction – equivalent to about 2% of Somerset’s annual economy in 2014, or more than 3% if we count wider economic benefits generated indirectly by spending on the project.
This value will mainly come from major supply chain contracts with local companies, salaries paid to local people during construction, and spending by workers coming into the area. We have already awarded more than £250 million worth of contracts to local companies.
As well as these economic benefits, Hinkley Point C will pay local and corporation tax throughout its operating life.
IMPROVING LOCAL INFRASTRUCTURE
In the process of getting planning consent for Hinkley Point C, we have also helped improve local roads surrounding the site, including a bypass around the village of Cannington.
How we measure progress
What we measure: the direct and indirect economic value we add to the UK.
Our targets: this is a new goal for us, and we want to understand how we can best contribute to the UK at a local, regional and national level.
We already have a good understanding of the socio-economic impact of our new nuclear build projects such as Hinkley Point C. We also know that each of our existing power stations supports many jobs, directly and indirectly, and provides an important income for the often rural and remote regions in which they are based. For example, a study from 2011 found that the EDF Energy Torness site supports a total of 1,300 jobs and contributes an income of £56 million in Scotland and other parts of the UK.
We have now commissioned a study to understand the economic impact of all our activities, including at our offices and call centres. The results will help us find new opportunities to create more value for our business and society.
How we conduct our business, and the impact and influence we have through our wider supply chain, is just as important as our financial performance.
Through our Finance and Ethics ambition we are working to ensure sustainable, ethical practice across our supply chain, and we will not tolerate any fraud, corruption or abuse of human rights.
CODES OF CONDUCT
We want to create a culture of openness, integrity and accountability. This approach benefits not only us, but also our customers, employees and shareholders.
To help our people work in a positive way we created some guidelines:
- act honestly and with integrity to safeguard our revenue, property and reputation
- maintain the highest ethical standards and take action when others do not
- observe legislation and regulations
- behave in a way that protects the interests of our company, our colleagues and the environment
- respect our policies and procedures
- report any activities that don't follow our codes of conduct to our Compliance Officer or the Head of UK Internal Audit
Our Business Code of Conduct, which covers both employees and contractors, sets out how we protect human rights.
At EDF Energy, we recognise that Modern Slavery is a growing global concern, and we are working to ensure that our own operations, and those of our supply chains, are appropriately evaluating the risks of Modern Slavery. In Autumn 2016 we ran a workshop with colleagues from across the company and created a cross-company working group focusing on the Modern Slavery Act. We will publish our Modern Slavery Statement later in 2017.
We report our sustainability performance annually through our Better Energy Ambitions, and are signatories to the United Nations Global Compact (UNGC).
We want to build an inclusive, open and welcoming workplace where everyone can be themselves and do their best. In line with this, we are due to publish a more detailed breakdown of our workforce in "Diversity & Inclusion Week" at the end of May.
We have also reviewed the way we recruit and pay people, among other human resources processes and policies. In 2016 we were officially recognised as a Living Wage employer. We are now working with our suppliers to give the Living Wage to those who regularly work on behalf of the company.
This will help us achieve the UNGC advanced level in 2017.
We take a responsible and honest approach to tax, in line with our values:
- acting with integrity
- planning tax to make sure our work is legitimate and done in an efficient way
- maintaining an open, honest and positive working relationship with HMRC
EDF Energy is a UK company and part of EDF Group. All our profits and losses are appropriately taxed or relieved in the UK, regardless of where individual entities were originally incorporated.
We always pay the right amount of tax at the right time according to both the letter and spirit of UK tax laws. We also sometimes discuss significant transactions with HMRC if there’s any uncertainty about how they should be taxed.
ETHICAL SUPPLY CHAIN
We are asking our key suppliers to complete the Chartered Institute of Procurement and Supply Sustainability Index and to assess the social, economic and environmental factors that affect their business. We also make sure our suppliers follow the Ten Principles of the UN Global Compact.
How we measure our progress
We have two approaches to achieving this ambition.
Firstly, we look to develop and communicate strong ethical business policies and standards. As part of this we measure whether our employees are following our Business Code of Conduct and track our annual performance against our tax and labour policies and standards.
Secondly we set expectations for ethical conduct in our supply chain. Including whether our ethical principles are embedded across our supply chain and our suppliers comply with the United Nations Global Compact (UNGC). This involves:
- having our top 200 suppliers signed up to the Chartered Institute of Procurement and Supply (CIPS) Sustainability Index, and
- 95% of suppliers demonstrating compliance with the Ten Principles of the UN Global Compact.
These activities build on our two existing goals that were:
- to show we are responsible and honest in the way we manage our taxes
- ensuring sustainable ethical practice across our supply chain
We strive to improve our standards of ethical behaviour continuously, and our commitment to ethical business practice is outlined in our Ethics & Business Conduct Policy.
How are we doing
In 2016 we spent £2.2 billion with about 4,000 suppliers – about the same as in 2015.
96 of our key suppliers have published, or are in the process of publishing, scores within the CIPS Sustainability Index representing over 30% of our annual expenditure. In 2017, our target is for 150 of large expenditure key suppliers to publish their CIPS Sustainability Index assessment with improvement actions where appropriate.,
In 2016, we created a Supply Chain Diversity and Inclusion Working Group to encourage diversity and inclusion throughout our supply chain. We also organised events that helped us make connections between our key suppliers and our Diversity and Inclusion Networks. This supports our reassessment against the National Equality Standard accreditation that we hope to retain in 2018.
Our six Better Energy Ambitions set out our short, medium and long-term goals and targets for improving our social, economic and environmental performance.