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EDF Share Price Soars as France Grants Tariff Rise

iNVEZZ.com, Tuesday, July 9th: Shares in Electricite de France SA (EPA:EDF), the world’s biggest nuclear power plants operator, soared in Paris trading today after the French government allowed an increase in regulated electricity prices for households in an attempt to cover costs at the state-owned utility.

**EDF’s Share Price Rises the Most since 2008**
EDF’s share price jumped ten percent to €19.56 in Paris, the biggest intraday increase for the stock since October 29, 2008, making the French utility the best performer on the Stoxx Europe 600 Index. The stock price surged after France’s Energy Minister Philippe Martin authorised Paris-based EDF to increase the regulated domestic tariff by five percent as of August 1, and by a further five percent in August 2014, the biggest increase in power prices in at least a decade.

As Bloomberg reported, EDF was raised to neutral from sell at UBS AG, which noted that the increase in power prices and a “very likely” life extension of nuclear reactors would enable the utility to keep debt under control. The newswire quoted UBS analyst Patrick Hummel as saying in a note that EDF might continue to pay a 6.5 percent dividend yield. He also raised his 2013-2016 estimate for EDF’s earnings before interest, taxes, depreciation and amortisation (EBITDA) by two to nine percent.

**Tariff Debate**
The rise in tariffs is less than the increase recommended by France’s Commission de Regulation de l’Energie (CRE) which last month said that electricity tariffs for households should rise between 6.8 and 9.6 percent this year to cover a shortfall in costs, whereas next year they should increase by another 3.2 percent. The French energy regulator also noted that last year the gap between EDF’s costs and the tariffs, which the utility was allowed to charge, amounted to as much as €1.47 billion (£1.27 billion). Last week Fitch revised its ratings outlook for EDF to negative from stable on worries about the utility’s debt position and the likelihood that tariff increases might be insufficient.

The energy and environment ministry said that it had decided to spread out the increase over more than
one year “to protect households’ purchasing power as much as possible”.
!m[Power Price Hike Aims to Cover State-Owned Utility’s Costs ](/uploads/story/3809/thumbs/pic1_inline.jpg)
Deutsche Bank AG analysts have estimated that every one percent change in the aggregate tariff in France, where the utility earns more than 60 percent of its operating profit, has a five percent impact on group earnings.

The tariff debate has been complicated by the possibility of the French government cutting its stake in EDF from 84.4 percent to about 75 percent. Reuters quoted traders as opining that if the state wanted to get a good price for its shares, it should provide maximum visibility on tariffs.
**EDF’s share price was 8.62 percent up at €19.28 in Paris as of 14:50 CEST on 09 July 2013.**

About the author

Alice Young
Alice joined the Invezz team after motherhood convinced her to make a career change from actuary-ing. She brings a forensic eye for detail developed through crunching numbers on underwriting satellite insurance and the like.

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