French Power Prices, Utilities Rise on Carbon-Price-Floor Plan

  • French President Hollande pledges minimum emissions price
  • EDF gains as much as 10% after dropping 11% on Monday

European power, carbon prices and utility stocks jumped after French President Francois Hollande said the nation would commit to a minimum price for emission allowances and close some nuclear reactors from 2018.

Power for delivery in 2018 and 2019 posted record gains while carbon permits surged to the highest since January, according to data compiled by Bloomberg. That helped boost shares in Electricite de France SA, the nation’s biggest electricity producer, by as much as 10 percent, the biggest increase since March 18.

“France must show the way, it will unilaterally commit to give carbon a floor price” and propose a price corridor for Europe’s emissions trading market, Hollande said Monday in a speech, adding that details will follow this year.

Governments and companies are showing a willingness to deal with commodity supply gluts, said Andreas Speer, a commodity analyst at Bayerische Landesbank in Munich. While pessimism in January, when the Bloomberg Commodities Index fell to the lowest since 1999, wasn’t justified, the current “explosive price movement” isn’t sustainable, he said.

Power Contracts

French power for delivery in 2018 rose as much as 13 percent to 33.40 euros ($37.75) a megawatt-hour Tuesday while the 2019 contract climbed as much as 6.9 percent to 31.70 euros, the highest since Jan. 8, according to broker data compiled by Bloomberg. Carbon for December delivery rose to a three-month high, gaining as much as 14 percent to 6.71 euros a metric ton on ICE Futures Europe.

Accelerating the pace of annual carbon cuts in the European Union’s market was among options floated on post-2020 market reform in the European Parliament’s environment committee, according to document obtained by Bloomberg.

EDF was the biggest gainer on the Stoxx 600 utilities index, which rose the most since April 13. The company’s shares have lost half their value over the past year as a 21 percent drop in French power prices and shrinking domestic share sapped cash flow. 

The Paris-based utility dropped the most in seven weeks Monday after announcing plans to sell about 4 billion euros of new shares and deepen cost cuts.

Nuclear Plants

EDF will have to propose the closing of some nuclear plants from 2018 starting with its Fessenheim reactor, and extend the lifespan of other plants, Hollande said. 

Hollande seeks to shut some nuclear stations to help reduce France’s dependence on nuclear power in favor of renewable energy. EDF Chief Executive Officer Jean-Bernard Levy said that the company has no intention of closing any nuclear power stations other than Fessenheim. The nation will hold presidential elections next year, meaning that a change in government may make these plans obsolete.

It’s unlikely that France would win political support from EU nations for a carbon-market price corridor, said Louis Redshaw, founder of carbon-market consultants Redshaw Advisors in London.

“Putting together a proposal is one thing, garnering support and implementing it is another,” Redshaw said by phone. “If it were to win support, it could happen quickly” because rules for next decade are already being reviewed.

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