EDF Nuclear Output Gain Outweighs Political Risks, Goldman Says

Electricite de France SA (EDF)’s improved nuclear output outweighs the negative impact of political uncertainty about the future of atomic power ahead of next year’s presidential election, Goldman Sachs Group Inc. said.

The utility’s increased 2011 production target “reflects strong operational performance” and possible further “rapid improvements” over the next two years, Goldman analyst Andrew Mead wrote in a note today. The bank has a ‘buy’ rating on the shares and raised its earnings outlook.

EDF earlier this month increased a full-year target for atomic output from the country’s 58 reactors and said they will have more units available to generate power this year than last.

Debate about France’s dependence on nuclear power intensified after the opposition Socialist and Greens parties last week agreed to campaign for the closure of 24 reactors by 2025. The government, atomic operators EDF and Areva and heavy industries reliant on relatively cheap power have redoubled efforts to defend the energy. President Nicolas Sarkozy is scheduled to give a speech on atomic energy tomorrow.

Socialist presidential candidate Francois Hollande has called for a reduction in the country’s reliance on nuclear power to 50 percent of its electricity needs by 2025 compared with more than three-quarters now.

“We can’t continue to live with all nuclear,” Pierre Moscovici, head of Hollande’s campaign, said today on RTL radio. “It’s necessary to prepare for an energy transition.”

Two Scenarios

EDF traded 2.2 percent higher to 18.47 euros at 1:17 p.m. in Paris. The shares have lost about 12 percent since Nov. 15 when the Socialist-Greens political deal was unveiled and about 40 percent since the March 11 nuclear disaster at Fukushima, Japan.

Goldman has a 12-month price target of 28.20 euros, lowered to reflect an average of two scenarios for nuclear energy in France: the current one and that of the Socialists, according to today’s report.

“The key downside risk is if the Socialists win and implement their nuclear policy aggressively leading to more than one nuclear plant (Fessenheim) closing before 2020,” the report said. Goldman would value EDF’s shares at 23 euros each if Hollande wins and 33 euros a share under current policy.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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