Belgium, (Brussels Morning Newspaper) France has announced plans to inject about 2.1 billion euro in the state-owned Électricité de France (EDF) power utility to help it weather the cost demands arising from the ongoing energy crisis.
The company was hit by the government’s order to sell electricity below market price at a time when it is to temporarily shut down nuclear reactors for maintenance, all of which will increase pressure on the EDF, Reuters reports.
The money is to come in the form of a rights offering, EDF announced today, noting that the move should raise roughly 2.5 billion euro.
In a rights offering, existing security holders are offered the opportunity to purchase additional securities proportionate to their existing holdings.
Bruno Le Maire, France’s Minister of the Economy, Finance and Recovery, in an interview with RTL radio said that “for the market, for investors, it’s a strong signal…[that] you can have confidence in EDF.”
Company executives pointed out that the offering will help the EDF to maintain its credit rating by plugging holes in its budget for 2022 and 2023.
Government to reform EDF
EDF CEO Jean-Bernard Lévy declared it was vital to implement broader structural reforms in the longer term, and noted that the government would focus on this later this year, once upcoming parliamentary and presidential elections were concluded.
Since the EDF began facing a series of setbacks, share prices have been in decline. Due to technical problems, the company now faces having to shut down some of its nuclear reactors, which generate most of France’s electricity, for maintenance purposes.
The company’s financial report presented today predicts that earnings before interest, tax, depreciation and amortisation (EBITDA) will drop approximately 11 billion euro this year due to the temporary shutdowns.
It also noted thhat the government order to sell electricity below market price is likely to lower EBITDA by an additional 8 billion euro.
The French government is worried about growing public anger over soaring energy prices and has turned to the state-owned power utility to cushion the blow.While many power utilities have profited from rising energy prices, the EDF is missing out because the government has forced it to sell electricity below market price. Despite this, the company predicted that rising prices will add approximately 6 billion euro to its EBITDA this year.