EDF Starts Rights Offering for More Than €3 Billion
Electricite de France SA kicked off a deeply discounted rights offering of more than 3.1 billion euros ($3.4 billion), a stopgap measure as the state prepares to overhaul the ailing nuclear power giant.
A broader reform of the debt-laden utility is planned by President Emmanuel Macron, who said Thursday some EDF assets should be nationalized. The firm, already owned 84% by France, needs to bolster its battered finances as a combination of reactor shutdowns and government policies to cap power prices slash its earnings this year.
Macron said the state needed to take back control of several “industrial players” in the energy sector and to decouple European electricity from gas prices as the country prepares for decades of growth in power demand amid a switch away from fossil fuels.
The proposal for EDF shows how record power costs, exacerbated by Russia’s invasion of Ukraine, are prompting governments to rewrite energy policies. From Germany’s abandonment of the Nord Stream 2 gas pipeline to the U.K.’s push to revive North Sea oil, Europe’s quest to be less reliant on imports has newfound urgency.
Macron, who is projected to be re-elected next month, is pushing to build new atomic plants and develop renewable energy as part of the drive to replace fossil fuels and make France carbon-neutral by 2050. EDF would struggle to fund this alone, and last month the president pledged tens of billions of euros of public financing to help it make these investments.
To bolster its balance sheet, the utility said a month ago it would sell about 2.5 billion euros of new stock, but has since revised higher the impact of both declining nuclear production and the government’s cap on power bills. EDF also plans to divest more assets and offer investors the option of receiving dividends in shares instead of cash.
EDF’s offering will be priced at 6.35 euros a share for a subscription period from March 23 to April 1, the state-controlled company said Friday. The Finance Ministry confirmed the government will invest about 2.65 billion euros as part of the sale.
EDF fell 1.1% to 9.21 euros a share at 12:11 p.m. in Paris. The stock, which traded as low as 6.95 euros on March 7, is down 11% this year on concern earnings could be wiped out as the company is forced to offer larger discounts on the shrinking volume of electricity it generates.
“EDF’s stock is holding up because the earnings dilution will be slightly lower and cash proceeds higher than considered last month thanks to the recent gains in the shares, which are supported by prospects of a potential nationalization and a smaller discount of new shares than what was considered,” said Tancrede Fulop, an analyst at Morningstar.
The utility was recently downgraded by several credit rating firms, which warned of more potential cuts as EDF’s net financial debt -- totaling 43 billion euros at the end of last year -- is set to climb as earnings slump.
Last week, Bloomberg reported that the French state was considering whether to revive a plan to nationalize the debt-laden utility and reorganize its business with a focus on nuclear production. Under the revamped plan reported by Bloomberg, EDF could divest stakes in some overseas holdings, including renewable assets. That would raise cash to finance the company’s key nuclear and hydroelectric operations in France.
Previous efforts to reorganize EDF have run into problems. In 2019, the French government was considering buying out minority shareholders as part of a restructuring to help fund the lifetime extension of EDF’s aging nuclear plants and invest more in renewables.
The plan stalled in 2021 after more than a year of discussions as the European Commission -- which vets proposals that could be considered “state aid” to a company -- asked for deeper separation of EDF’s various entities in exchange for higher regulated prices for its nuclear power.
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