Electricite de France SA, Europe’s biggest power generator, jumped in Paris trading after announcing a surprise dividend increase and cost-cutting plans.
EDF advanced 5 percent to 14.95 euros. Almost four times more shares were traded today compared with the three-month average.
The utility plans to save 1 billion euros ($1.3 billion) and keep investment stable at 12 billion euros in 2013, it said in a statement, having previously forecast an increase in spending. The company raised the full-year dividend to 1.25 euros a share from 1.15 euros, a payout ratio of 55 percent, and offered investors a stock payment option for a portion.
EDF is sending a “very strong signal by increasing the dividend,” Ingo Becker, an analyst at Kepler Capital Markets in Frankfurt, said today in a note. Either EDF is “over-optimistic on future development” or it has “clear political backing” on such issues as French power prices, he said.
State-controlled EDF has sought higher electricity prices from the government to help finance investments and cover its costs. While the regulator has pushed for a 30 percent increase in regulated tariffs by 2016, President Francois Hollande has pledged to contain household energy expenses even as he drives an expansion in renewable-power generation.
EDF faces billions of euros of costs to improve safety at its 58 French reactors after the country’s atomic authority tightened regulations following the 2011 Fukushima meltdown in Japan. Work to replace equipment may also allow it to operate the reactors for as long as six decades, Chief Executive Officer Henri Proglio has said.
Net income increased to 3.3 billion euros in 2012 from a restated 3.15 billion euros a year earlier, Paris-based EDF said today. That missed the 3.9 billion-euro median estimate of eight analysts surveyed by Bloomberg.
Profit was boosted by a 629 million euros payment from the government as part of an accord reached last month to be compensated for a renewable tax deficit of 4.9 billin euros. The payback will come by the end of 2018.
Lowering the outlook for annual spending will “enable the group to respond to industrial issues while continuing to improve the company’s financial structure,” Proglio said today. EDF reported debt rose to 39.2 billion euros at the end of December from 33.3 billion euros a year earlier.
French wholesale and consumer electricity prices don’t adequately reflect the costs of producing nuclear power, he said, adding that talks with the government this year on possible tariff adjustments will be crucial.
Hollande has vowed to lower the nation’s dependence on atomic energy, and decided in September that EDF’s oldest reactor at Fessenheim must shut in 2016. The utility’s reactors supply three-quarters of France’s power output, making it the world’s most nuclear-dependent country.
EDF’s earnings before interest, taxes, depreciation and amortization rose 7.7 percent to 16.1 billion euros last year, in line with the 15.95 billion-euro median estimate of 19 analysts. Ebitda may hold steady or climb as much as 3 percent this year, excluding the Edison unit, EDF said. It had a previous goal for average annual growth of 4 percent to 6 percent through 2015.
Edison’s results may fluctuate this year and next, EDF said, citing talks on gas-supply agreements. Earnings at the Italian unit are “highly dependent on the timetable for renegotiating gas contracts,” EDF said in a presentation.
The company expects French atomic output of 410 terawatt- hours to 415 terawatt-hours this year, and a busier schedule for in-depth reactor inspections. The utility’s French nuclear production fell to 405 terawatt-hours last year from 421 terawatt-hours in 2011.
EDF last year said investment would increase to as much as 15 billion euros in 2015 from 10.5 billion euros in 2011 to pay for reactor equipment, safety upgrades and new atomic plants. Spending of 13 billion euros had been planned for this year after 11.8 billion euros in 2012. The company has estimated it will have to spend 55 billion euros through 2025 on safety and equipment upgrades.
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