(Fixes typographical error in Colombus Consulting)
* Government moves to limit voters' energy bills
* Forces EDF to sell more cheap energy to the market
* EDF shares drop as much as 25%
* Hit comes amid series of nuclear setbacks for state-owned
PARIS, Jan 14 (Reuters) - 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, 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
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
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
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.
"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.
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)
(Reporting by Benjamin Mallet, Benoit Van Overstraeten and
Editing by Jason Neely and David Goodman)