France’s EDF launches 3 billion euro capital increase, shares up

EDF (PA:EDF) said on Friday it would increase its capital by more than 3.1 billion euros ($3.44 billion) as the state-owned French power utility grapples with offline nuclear reactors and government price curbs on power sales.

“The rights issue is part of a broader action plan aimed at strengthening the balance sheet structure,” it said in a statement.

Earlier this week, EDF warned on its 2022 profit outlook, saying it could miss its financial targets because it was required to sell power at below-market prices and due to lower nuclear output.

After opening lower, EDF shares were up 0.2%, at 9.33 euros at 0915 GMT, but they still have lost almost 11% since the start of the year, versus a 6% decline for the Stoxx Europe 600 Utilities.

The capital increase, which was flagged last month by the government, will result in the issuance of 498,257,960 shares at a price of 6.35 euros.

Analysts at Jefferies estimate the net proceeds of the operation at just under three billion euros, adding the discount of the issuance price versus Thursday’s close was over 28%.

The government, which owns more than 80% of EDF, earlier this year increased the amount of electricity that EDF is required to sell to rivals at below-market prices, with energy costs a major issue for voters before presidential elections in April.

In a separate statement, the Finance Ministry said it has committed to subscribing to the rights issue pro rata with its 83.88% stake, for a total of 2.654 billion euros ($2.94 billion).

“The French state, as a long-term shareholder, will help secure EDF’s financial position as well as its ability to finance itself in the short and medium term,” it said.

“The French state renews its trust in the management and all the company’s employees to make EDF a success,” it added.

EDF, whose share price has plunged in recent months, is tasked by President Emmanuel Macron’s government with building six next-generation EPR reactors, requiring several billion euros in investment.

At the end of 2021, EDF’s net debt stood at 43 billion euros, giving a net debt/EBITDA ratio of 2.39, versus 2.6 in 2020.

Macron said on Thursday that France should reinforce its capital position in the utility, speaking in front of journalists as he presented his programme for re-election.

EDF’s capital increase will run from March 23 to April 1.