EDF stock holds steady on first day out

21st November 2005, Comments 0 comments

PARIS, Nov 21 (AFP) - Shares in French electricity giant EDF, the leading world nuclear energy producer, gained slightly when they were launched on Monday but brokers said the price was being bolstered by banks backing the part privatisation.

PARIS, Nov 21 (AFP) - Shares in French electricity giant EDF, the leading world nuclear energy producer, gained slightly when they were launched on Monday but brokers said the price was being bolstered by banks backing the part privatisation.

The opening price showed a gain of 0.25 percent in the landmark operation to sell 15.0 percent of the group to raise EUR 8bn and valuing the business at 55bn euros at least.

The government, in face of fierce opposition from trades unions, had already declared the issue a success because about 5 million people and more than half of the EDF workforce had subscribed.

But some analysts argued that the issue price of EUR 32 for small savers had been pitched too high, and had forecast that the price might slump by up to 20 percent in initial trading.

However, the price of the shares was showing a slight gain of 0.25 percent to EUR 32.08 in early afternoon trading. But some analysts suggested that the banks behind the issue were buying stock to prevent a fall on the first day.

At brokers JCF Facset, stocks strategist Pierre Sabatier said: "The banks which organised the operation are trying to hold the price up to show a gain, otherwise a price slump would be a catastrophe for the state.

"In the next two to three days, the share is unlikely to move much, thanks to the banks."

Some experts believe that the issue price was too high given the level of debt owed by the group, the prospect that its nuclear power stations will age and the fact that the French state will continue to oversee its energy pricing policy.

Others have suggested that many small investors bought shares with a view to selling them after the launch for a quick profit, as has been the case with previous privatisation issues.

Shares in gas utility Gaz de France, which was partially privatised in July, surged by 23 percent when they were floated and now show a net rise of 9 percent.

An analyst at brokers Fideuram Wargny, Julien Picard, commented: "At this price, we will not see EDF repeat the stock market course of the GDF (Gaz de France)."

The government has sold holdings in five formerly state-controlled companies in the last three and a half years, with the receipts used partly to alleviate strained public finances.

The sale of 15 percent of EDF was opposed by trades unions which believe public utilities should remain completely under state control, and the opposition Socialist party agreed at the weekend to reverse the operation if it regained power.

The President of fund managers Malmy Finance and Arkeon Finance, Robert de Vogue, said: "It's impossible that the French state and that the banks let the price fall below the issue price because the next time that savers are needed for other privatisation operations, people will turn away."

Small investors took 60 percent of the shares on public offer in EDF and institutional investors bought the remaining 40 percent at EUR 33 per share. In addition, the state sold shares directly and on preferential terms to EDF employees to raise about one billion euros for severely strained public finances.

The EDF flotation is the biggest ever carried out on the Paris stock market in terms of the amount of capital, EUR 7bn, being raised for the company.

The issue is the biggest in the world this year alongside the flotation of the China Construction Bank in Hong Kong last month.

The issue price valued EDF at EUR 55bn, earning the company a place in the French bluechip CAC 40 index and giving it the biggest market capitalisation of any electricity utility in Europe.

EDF, which produces 74 percent of its electricity from nuclear power stations, generates about a quarter of all Europe's electricity. It is the biggest generator in Europe and the biggest nuclear-power generator in the world.

The group has also become an international operator through 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.

Copyright AFP

Subject: French news

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