French state to inject over 2 billion euros into troubled EDF

© Reuters. FILE PHOTO: The logo of EDF (Electricite de France) is seen on the French state-controlled utility EDF’s headquarters in Paris, France, February 15, 2019. REUTERS/Charles Platiau

By Benjamin Mallet and Christian Lowe

PARIS (Reuters) -The French state said on Friday it will inject more than 2 billion euros ($2.27 billion) into power utility EDF (PA:EDF), which is struggling with the impact of a government order it sell power at below-market prices and with nuclear reactors going offline.

The capital injection will come via a rights issue that EDF announced on Friday and which it said will raise an approximate total of 2.5 billion euros.

Finance Minister Bruno Le Maire, speaking on France’s RTL radio, said the state which already holds a majority stake in EDF would take part in the rights issue to the tune of more than 2 billion euros.

“For the market, for investors, it’s a strong signal. You can have confidence in EDF,” Le Maire said.

Reporting its financial results earlier on Friday, EDF said an unexpectedly steep reduction in its nuclear power output will reduce its EBITDA core profit in 2022 by an estimated 11 billion euros.

EDF’s share price has been on a downward trajectory after the company suffered a succession of setbacks.

Technical problems at the nuclear plants that generate the bulk of its power will force it to take much of its capacity off line for checks and maintenance.

EDF managers say they are also facing a major financial hit after the government ordered the company to sell power at below-market prices.

The government, two months from a presidential election in which President Emmanuel Macron is expected to run, is concerned about mounting public anger over rising energy prices, and has turned to EDF to help soften the impact.

Higher global energy prices have created windfalls for many power producers, but the French government’s decision that EDF must sell at below market levels has meant the company is unable to fully benefit.

Nevertheless, EDF forecast on Friday that its earnings before interest, tax, depreciation and amortisation this year will still be boosted to the tune of 6 billion euros by higher energy prices.

Macron announced this month that France will build at least six new nuclear reactors in the decades to come, with EDF given the job of building and operating them.

($1 = 0.8796 euros)