EDF investors show confidence in nuclear power

18th November 2005, Comments 0 comments

PARIS, Nov 18 (AFP) - Five million French savers showed confidence on Friday in French electricity utility EDF, a leading nuclear energy producer, by subscribing for a privatisation share issue valuing the business at EUR 55bn.

PARIS, Nov 18 (AFP) - Five million French savers showed confidence on Friday in French electricity utility EDF, a leading nuclear energy producer, by subscribing for a privatisation share issue valuing the business at EUR 55bn.

The French government has pressed ahead with the sale of 15 percent of the state-owned group, the biggest European electricity producer, despite opposition from trades unions and concern about the group's nuclear interests and the cost of decommissioning them.

The operation, which spotlights issues regarding the future of nuclear energy, is expected to raise up to EUR 7bn for the business. In addition the state is making shares it owns available to employees to raise about one billion euros for severely strained public finances.

Unveiling the issue price for investors on French radio, finance minister Thierry Breton said that small investors would pay EUR 32 per share and institutional investors would pay EUR 33.

Breton said that 4.85 million French savers had subscribed for shares and "with employees and former employees, we think that there will be more than 5 million people who become owners of part of the capital of EDF".

He added: "This is a very big success with people."

EDF president Pierre Gadonneix said in a statement to AFP that the capital increase, estimated to be the biggest in Europe since 2001, would allow EDF to consolidate its position.

"The capital increase will allow EDF to continue to carry out its public service mission in the best conditions and to accelerate its development to establish itself durably as a European energy leader," said Gadonneix.

He also said that more than 100,000 employees had subscribed for stock which meant that the target of attracting more than half of the workforce as shareholders would be achieved.

Breton said that demand from institutional investors, whose allocation of shares in the issue is to be reduced to 40 percent of the total from the 50 percent originally foreseen, was several times greater than the number of shares on offer.

EDF, which produces 74 percent of its electricity from nuclear power stations, generates about a quarter of all Europe's electricity. A number of countries in Europe have rejected nuclear energy or have backed away from their own nuclear generation.

The group has become an international operator, having made a number of foreign takeovers and owns assets in Asia, Africa and South America. It has 42 million customers world-wide, about a third of which are outside France.

The final issue price is at the top end of the price range initially envisaged by the French government of EUR 28.50-33.10 per share.

The issue terms value the group at EUR 55bn euros at least. EDF will have the biggest market capitalisation of any electricity utility in Europe when trading in its shares begin on the Paris stock exchange on Monday. EDF's stock market value will be greater than that of German energy group Eon and of Endesa in Spain.

"The price seems a bit expensive," said Xavier de Champsavins, a portfolio manager at Meeschaert.

He said that the risks for investors were price controls on electricity imposed by the French government and the costs of replacing and decommissioning nuclear power facilities, which have a limited lifespan.

"At the same time, nuclear power is the great advantage of EDF, which has a lead on the pack. We are now realising that this type of energy is cleaner than expected and is indispensable in light of high oil prices," Champsavins said.

The French government, under pressure from trade unions which oppose the privatisation of public services, has said it will not allow its interest in the group to fall below the threshhold of 85 percent resulting from the flotation of 15 percent in the part privatisation.

Under the law authorising the operation, the state could allow its holding to fall to 70 percent.

The part privatisation comes four months after the flotation of the national gas utility Gaz de France (GDF), which attracted 3.0 million French shareholders.

Copyright AFP

Subject: French news

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