EDF will be bailed out to the tune of 2.7 billion euros by the State

Posted 18 March, 2022

EDF on Friday launched a capital increase of more than 3.1 billion euros, of which 2.7 billion will be provided by the State, in order to strengthen its finances which should be put to the test this year.

The principle of this fundraising had been unveiled on February 18, EDF recalls in a press release, but its amount is ultimately much higher than the 2.5 billion then announced by the company, which is almost 84% owned by the State.

The group, which expects a plunge in its result in 2022, must deal with problems in nuclear production and government measures to limit the rise in electricity bills.

It will put up for sale two new shares for 13 existing shares, at a unit price of 6.35 euros per new share, with preferential subscription rights maintained.

"The capital increase that we are launching today will allow the group to strengthen its balance sheet structure, in the context of the events of early 2022, and to pursue its CAP 2030 strategy", indicated the group's CEO Jean-Bernard Lévy, quoted in the press release.

In 2021, the group saw its net profit multiply by 8 to 5.1 billion euros but warned that it would be heavily affected this year due to corrosion problems on the safety systems of several reactors. These problems led to prolonged stoppages for several of them.

But above all, the group will suffer from government measures to limit the rise in electricity bills to 4% this year.

This government measure, in the midst of a debate on purchasing power and with the approach of the presidential election, obliges EDF to sell more nuclear electricity at a discounted price to its competitors (46.2 euros per MWh), while the prices on the wholesale markets are very high (257 euros per MWh).

Its results should thus be amputated this year by around 11 billion euros due to the drop in nuclear production and by 8 billion due to the exceptional measures of the government, which has decided to get its hands on the wallet.

2.7 billion from the State

The State, which holds with EPIC Bpifrance 83.88% of EDF's capital, has already announced in a separate press release "to renew its commitment up to this share", "i.e. a subscription of 2.654 billion euros" to the capital increase.

"The State thus contributes, as a wise long-term shareholder, to securing EDF's financial situation and its financing capacity in the short and medium-term, and enables the company to pursue its strategy of profitable development in the framework of the energy transition", underlined the Ministry of the Economy.

This capital increase comes at a time when the group is heavily indebted, at 43 billion euros at the end of 2021, but must invest heavily.

The announcement of this increase on February 18 was greeted cautiously by the unions.

"Certainly, we are strengthening equity, but in a very weak way and that will not solve the financial equation, faced with the wall of investments that EDF has to make", had reacted to AFP Amélie Henri, secretary national CFE-Unisa energies for EDF.

The subscription period for nearly 500 million new shares will open next Wednesday and end on April 1 inclusive. The company will publish the results of its capital increase on April 5.

In mid-February, EDF had also announced an "action plan" to deal with these difficulties, then also evoking a disposal plan of 3 billion euros in total until 2024.

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