EDF shares plunge as Macron shields consumers from soaring energy bills
PARIS, Jan 14 (Reuters) - EDF's (EDF.PA) 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, which is 80% owned by the French government, said the move would cost the company up to 8.4 billion euros ($9.64 billion) and dropped its 2022 earnings guidance.
Three months ahead of a presidential election, President Emmanuel Macron's government is facing mounting public pressure over the rising cost of living.
By promising to cap power price increases at 4% this year, it left EDF investors to feel the pain rather than households.
EDF shares were down about 17% at 8.64 euros by 1023 GMT, having earlier touched their lowest since September 2020. The company has lost more than 40% of its market value inside only one month.
Compounding EDF's difficulties, the group also lowered its nuclear production forecast late on Thursday after technical problems forced it to extend the outage of a fifth nuclear reactor.
The nuclear power sales to competitors and the outage could reduce the company's EBITDA operating profit by as much as 13 billion euros, though the final figure is likely to be closer to between 5 billion and 10 billion euros, analysts at investment bank Jefferies said.
French forward curve power prices rose in early trading after news of the extended reactor outage but remained well below highs reached in mid-December.
Friday's move came after weeks of deliberation inside the French government over how to stick to a pledge that household electricity bills would not rise by more than 4% this year.
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 power prices would have jumped by more than 35% without the new price cap.
That would be avoided largely by forcing EDF to sell more cheap energy to the markets. In return, the government will allow a slight increase to the price at which EDF will have to sell that electricity, though it will remain below the utility's production cost and less than half the level of current market prices. read more
Colombus Consulting energy analyst Nicolas Goldberg said that, though the government said its main goal was to protect households, the current spike in energy prices is mainly felt by industrial users, some of which have already said they need to slow down production. read more
"In my view, the domino effect from this would potentially have been very strong," he said.
The decision to put a large chunk of the financial burden of counter-balancing rising energy prices on state-owned EDF squeezes a company that is already under pressure after a series of setbacks to France's nuclear power strategy.
JP Morgan said EDF might need to raise capital to make up for lost earnings.
EDF this week said that 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. read more
The company 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)
(This story was refiled to fix typographical error in Colombus Consulting)