EDF Drops on Concern France Will Force Closer Areva Ties

Electricite de France SA declined in Paris trading on concern Europe’s biggest power generator may become embroiled in a rescue of Areva SA after the nuclear-reactor supplier reported a record loss.

EDF, which operates 58 atomic reactors in France, fell as much as 4.2 percent and was trading down 98 cents to 23.36 euros at 3:41 p.m. in Paris.

Economy Minister Emmanuel Macron said in Le Figaro on Wednesday that the government was considering forging closer ties between the two state-controlled companies, with options ranging from a capital transaction to large-scale industrial cooperation. Areva reported a 4.83 billion-euro ($5.37 billion) loss last year and said it will slash costs, pare investments and sell assets as it braces for additional losses at three projects in 2015.

“The market is worried about a potential transaction between EDF and Areva,” Emmanuel Retif, an analyst at Raymond James in Paris, said by phone.

While EDF doesn’t currently plan a “financial transaction” with Areva, according to comments last month by Chief Executive Officer Jean-Bernard Levy, Macron advocated a “new convergence” of the two companies’ strategies.

Current talks with EDF “are about operations,” Areva CEO Philippe Knoche said during an analyst presentation on Wednesday. “Potential capitalistic talks will come if necessary, in a second stage, based on operational and industrial needs.”

Macron and Energy Minister Segolene Royal have called for an overhaul of France’s nuclear industry. The government is trying to push a law through Parliament to lower the country’s reliance on atomic power and boost energy efficiency and the use of renewables. That threatens to curb earnings at EDF.

Separately, Royal pledged late Tuesday to limit increases in EDF’s wholesale power rate and to overhaul a consumer tax that pays for renewable energy production. Those changes would mean EDF will have to introduce better cost controls while the cost of renewable energy will need to be lowered, Royal told lawmakers at a parliamentary hearing.

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