French energy company’s shares sink on falling demand and nuclear outages
Shares in Electricite de France SA dropped about 10 per cent on Monday after the company cut its cash flow targets and 2018 profit by 4 per cent because of falling demand and delays in restarting some of its nuclear reactors.
The state-backed utility said earnings before interest, tax, depreciation and amortisation for next year were now expected to be somewhere between $17.04 billion and $17.85 billion, compared with earlier forecasts of at least some $17.74 billion.
Besides lower demand, the company has been facing the closure of its Tricastin nuclear power plant in southern France, which was temporarily shut down in September by the national nuclear regulator to upgrade its earthquake proofing.
According to analysts, the market's reaction is a response to the company’s lower earnings combined with the fact that it has been commissioned to upgrade France’s aging nuclear fleet at a cost of some $58 billion, while it also has to pay some $25.7 billion for the two new nuclear reactors it will operate at Hinkley Point in the UK, a development that is already over budget.
On top of this, “EDF has about 31 billion euros ($36 billion) in net debt and 21 billion euros of pension obligations,” Chris Bryant wrote on Bloomberg's website.
The company will report its third-quarter results after markets close in Paris on Tuesday, but it has already announced that it will accelerate its plans to cut spending by an additional $116 million by the end of next year.
Nuclear and renewables accounted for 88 per cent of the French utility’s output in 2016.