EDF Advances After France Sets Nuclear Power Price at Level Utility Wanted
Electricite de France SA shares jumped after the French government matched the price requested by the utility for the sale of its nuclear power to competitors.
EDF climbed 1.03 cents, or 3.9 percent, to 27.66 euros in Paris. The stock has fallen 11 percent this year, valuing the company at 51.1 billion euros ($73.2 billion).
The company will be able to sell nuclear power to competitors at a wholesale price of 42 euros a megawatt-hour starting Jan. 1, 2012, Industry Minister Eric Besson said in a statement today. The price, fixed by the government under a law aimed at overhauling the French power market, Europe’s biggest after Germany, is higher than a rate of 35 euros a megawatt-hour wanted by GDF Suez (GSZ) SA, the atomic utility’s biggest rival.
“This is not about favoring EDF or penalizing GDF,” Besson said in an interview on Europe 1 radio. “It’s about securing supplies for the French and easing things for EDF, which is a major company for French electricity, and takes into account preemptively the work EDF will need to undertake following Fukushima.”
The law, known as Nome and passed by parliament last year, aims to open up the power market by forcing EDF, operator of the country’s 58 reactors and the dominant power supplier, to sell as much as a quarter of its output to competitors such as GDF Suez. The wholesale price will determine whether rivals can compete in France’s regulated market.
Not Competitive
The new prices “won’t permit, contrary to the commitments France made to the European Commission, the establishment of efficient competition on electricity supply in France,” GDF said in an e-mailed statement today.
“We expect EDF’s share price to react fairly positively on the back of this news,” UniCredit analyst Vincent Ayral said in a note to investors today. “The market has been concerned about the possibility of a postponement or cancellation of the Nome reform.”
The law is due to take effect July 1, when EDF can charge rivals 40 euros a megawatt-hour, before it’s raised to 42 euros. The legislation was aimed at avoiding European Commission sanctions that could have resulted in fines for EDF.
The French government asked for a report by Paul Champsaur, architect of the overhaul, to determine how to set the wholesale price. The Champsaur report had recommended a range of between 38 euros and 40 euros a megawatt-hour.
Production Costs
EDF Chief Executive Officer Henri Proglio has said the company’s production costs are 45 euros a megawatt-hour and the utility based 2011 financial targets on obtaining government approval to sell wholesale nuclear power at 42 euros a megawatt- hour. The country’s energy regulator said at the start of the year the price could range from 38.50 euros a megawatt-hour to more than 42 euros.
Proglio has repeatedly warned that a price lower than 42 euros a megawatt-hour would amount to a “fire sale” and the “pillage” of EDF. GDF Suez Chief Executive Officer Gerard Mestrallet has said this level would open France up to sanctions from the European Commission.
EDF’s share price fell to a two-year low this month following a government announcement to cap electricity price increases and uncertainty about the planned market overhaul. The utility’s shares have also been hurt by the possibility that the Japanese nuclear disaster at the Fukushima Dai-Ichi plant will curtail atomic expansion worldwide and force EDF to make expensive safety modifications to existing reactors.
To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Kari Lundgren in London at klundgren2@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
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