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EDF shares fell due to electricity discounts

Shares of the French energy company EDF fell by as much as 25 percent on Friday, but during the day they erased some of the losses. This is in response to a French government order requiring a company to sell more electricity at a huge discount in an effort to curb skyrocketing energy prices. EDF said that this step will cost it up to 8.4 billion euros (205.6 billion crowns) and therefore worsened the outlook for this year, writes Reuters.

Three months before the presidential election, the government of President Emmanuel Macron is facing growing public pressure due to rising living costs. The government has limited this year’s rise in electricity prices to four percent. Without these steps, prices would have risen 35 percent since February 1, Finance Minister Bruno Le Maire told Le Parisien. The impact of rising energy prices will thus be felt by EDF shareholders, in whom the state holds a majority, rather than by consumers.

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EDF’s difficulties are exacerbated by the fact that the group on Thursday lowered the outlook for nuclear power generation, by eight percent. Technical problems have forced it to extend the shutdown of one of its nuclear reactors.

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According to analysts at the investment bank Jefferies, the sale of nuclear energy to competitors, together with the shutdown, could reduce the company’s gross operating profit (EBITDA) by up to 13 billion euros, however, according to them, the actual amount will be closer to five to ten billion euros. JP Morgan said EDF may need to raise capital to offset the drop in revenue.

At the turn of the year, the European Commission presented a proposal for rules for ecological investments, for which the designation of taxonomy was adopted. Under certain conditions, the proposal classifies nuclear and gas as transient energy sources, which is to attract private investors to support them. Brussels has heard calls from a number of countries, including the Czech Republic, which want to use nuclear and gas as a backup source in the decommissioning of non-ecological coal-fired power plants and heating plants. European Union countries or non-governmental organizations can comment on the proposal until 21 January.

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Macron said the EC’s proposal for a so-called taxonomy was good. He reiterated that nuclear and natural gas were among the so-called green investments. France took over the presidency of the European Union in early January.

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