EDF Slumps After Nuclear Price Concerns Trigger Stock Downgrade

Electricite de France SA, Europe’s biggest power producer, fell the most in five months in Paris trading after Bank of America Corp. cut its rating on the stock on concern earnings from nuclear generation will fall short.

EDF fell as much as 5.5 percent, the biggest intraday decline since Nov. 29, and was down 4.8 percent at 17.265 euros as of 4:39 p.m. local time. Trading volumes were more than 60 percent above the three-month daily average.

The French government, which controls Paris-based EDF, is due to set wholesale prices for the company’s atomic power by the end of the year as the utility pushes for higher rates to help finance investments and cover costs. The tariff “could disappoint investors,” Arnaud Joan, an analyst at Bank of America in London, wrote in a report published today.

EDF needs funds to improve safety at its 58 French reactors after the country’s atomic authority tightened rules following the 2011 Fukushima crisis in Japan. While the regulator has pushed for an increase of almost 30 percent in tariffs over five years, President Francois Hollande has pledged to contain household energy bills.

“The current government has little political incentive to push for a significant increase” in power prices beyond the 30 percent projected by the regulator by 2017, Bank of America said. The wholesale nuclear price may be set lower than the 44 euros a megawatt-hour previously estimated by the bank, it said, downgrading EDF to underperform with a share-price estimate of 15.50 euros.

French wholesale and consumer electricity prices don’t adequately reflect the costs of producing nuclear power, EDF Chief Executive Officer Henri Proglio said in February. The utility’s grid unit, RTE, said today that nuclear output dropped to 31.5 terawatt-hours in April from 33.1 terawatt-hours a year earlier because of more reactor shutdowns for maintenance.

EDF’s reactors supply three-quarters of power output in France, making it the world’s most nuclear-dependent country.

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