Electricite de France SA, at the center of a debate over the future of nuclear power in France, may not fare as badly as feared if presidential hopeful Francois Hollande is elected because the Socialist candidate will discard promises to scale back atomic energy, HSBC Holdings Plc said.
“We expect backtracking,” HSBC analysts wrote today in a report. Hollande’s pledge to lower France’s dependence on nuclear power is “unworkable” and lacks union as well as public support, they said.
The two-round presidential election in France, which gets a bigger proportion of its power from nuclear plants than any other country, has for the first time opened up a divide on atomic energy between two leading candidates. President Nicolas Sarkozy has vowed to maintain support for nuclear power while Hollande wants to get more energy from alternative sources.
“We do not pretend that business would be comfortable for EDF under any left-leaning anti-nuclear administration,” HSBC said. Electricity tariffs for consumers would rise “only very slowly” and new rates for low-income households would be announced, it said.
The bank raised its recommendation on EDF shares to overweight from underweight, in part because a Hollande victory is “priced in by the market,” according to the report.
EDF operates 58 reactors in France, which provide more than three-quarters of the country’s power. It’s building a 59th at Flamanville in Normandy and Sarkozy has pledged to push ahead with another at Penly. Hollande, who has consistently led in polls for a second-round win in the April 22 and May 6 vote, is seeking to cut the share of atomic power to 50 percent of supply by 2025, a move Sarkozy says would raise prices and cost jobs.
Hollande wouldn’t push ahead with closing nuclear reactors, HSBC said. He has already watered down an earlier commitment reached last year with the Greens to shut 24 reactors by 2025, declining to specify which plants and how many would be closed, other than the Fessenheim reactor, EDF’s oldest. He has pledged to close that plant within five years if he’s elected.
The nationwide nuclear debate follows moves by countries including Italy and Germany to scrap atomic power in the wake of the 2011 Fukushima reactor disaster in Japan. Opposition to Sarkozy’s nuclear ambitions is rooted in safety concerns.
EDF shares reached an intraday record low of 16.525 euros on April 2, an 81 percent decline from their 86.45-euro closing high in November 2007, on concern that spending commitments and political and regulatory uncertainty may hurt earnings.
The stock move “has gone too far,” HSBC said. “The brave should take the plunge now” in anticipation of a post-election bounce, the analysts said.
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