Sat. Jan 22nd, 2022


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PARIS — EDF’s shares slumped as much as 25% and were set for their worst day of trading after the French government ordered the utility to sell more cheap nuclear power to rivals to limit the rise in electricity prices.

EDF said the move would cost it up to 8.4 billion euros ($9.64 billion) and dropped its 2022 earnings guidance.

At 0845 GMT, its shares were down by about 20% at 8.25 euros, having earlier hit their lowest levels since September 2020.

Three months ahead of a presidential election, President Emmanuel Macron’s government is facing mounting public pressure over the rising cost of living.

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By capping power price increases at 4% this year, it left investors in the majority state-owned group to feel the pain, rather than households.

Compounding EDF’s difficulties, the group late on Thursday also lowered its nuclear production forecast after technical problems forced it to extend the outage of a fifth nuclear reactor.

The nuclear power sales to competitors and outage could slash EDF’s EBITDA operating profit by as much as 13 billion euros, although the final figure would likely be closer to 5-10 billion, analysts at investment bank Jefferies said.

French forward curve power prices rose in early trading following news of the extended reactor outage, but remained well below highs seen in mid-December.

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CAPITAL RAISING?

Macron has been wary of the impact Europe’s energy crisis is having on living costs ahead of April’s election. A 2018 fuel tax increase unleashed months of violent street protests that morphed into a broader anti-government revolt.

Finance Minister Bruno Le Maire told Le Parisien newspaper that without the new price cap new measures, power prices would jump by more than 35% instead of 4 % on Feb. 1.

The European Commission had approved the government’s plan of action, he added.

But the decision to put a large chunk of the financial burden of counter-balancing rising energy prices on state-owned EDF squeezes a company which is already under pressure after a series of setbacks in France’s nuclear power strategy.

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JP Morgan said EDF might need to raise capital to make up for the loss to earnings.

Earlier this week, EDF said fuel loading at its new-generation EPR reactor at Flamanville, a project already years late and billions over budget, would be pushed back by up to six months.

EDF is also dealing with technical issues linked to corrosion on tube weldings affecting four of its older reactors.

Julien Collet, deputy director general of French nuclear authority ASN, told Reuters that EDF had started a review to examine whether those corrosion problems existed elsewhere. EDF might have to study the possibility of halting reactors outside of its planned calendar, he said.

($1 = 0.8712 euros) (Reporting by Benjamin Mallet, Benoit Van Overstraeten and Tassilo Hummel; editing by Richard Lough and Jason Neely)

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