View of the company logo of Electricite de France (EDF) on the facade of EDF’s headquarters in Paris, France, July 7, 2022. REUTERS/Johanna GeronRegister now for FREE unlimited access to Reuters.com
- French government aiming to fully nationalise EDF
- State already holds an 84% stake in the group
- Utility grappling with outages and tariff caps
PARIS, July 13 (Reuters) – Shares in debt-laden EDF (EDF.PA) were suspended on Wednesday as the French government prepares to detail its plans to fully nationalise Europe’s biggest nuclear power operator.France said last week it wanted to fully nationalise EDF, in which the state already holds an 84% stake, without explaining how it would do so. In a statement, the finance ministry said it would clarify its plans before the market opens on July 19 at the latest.Taking EDF back under full state control would give the government greater licence to restructure the group that runs the nation’s nuclear power plants, as it contends with a European energy crisis.Register now for FREE unlimited access to Reuters.comA finance ministry source said the suspension of EDF shares, which was requested by the company, was temporary and trading would resume once the government had made clear how it would fully nationalise the utility.EDF has been grappling with extraordinary outages at its nuclear fleet, delays and cost overruns in building new reactors, and power tariff caps imposed by the government to shield French consumers from soaring electricity prices.Two sources told Reuters this week that the government was poised to pay up to 10 billion euros to buy the 16% stake in the group it does not already own, after including the purchase of convertible bonds and a premium it is expected to offer to minority shareholders. read more That would translate into a buyout price of close to 13 euros per share, a 30% premium to current market prices but still a big loss for long-term shareholders, as the group was listed in 2005 at a price of 33 euros per share.”A 30% premium does not seem unreasonable given the market fluctuations of the share price – we are still talking about a 50% to 60% loss for shareholders,” said Antoine Fraysse-Soulier, head of market analysis at eToro in Paris.The sources said the state wanted to move quickly and would probably launch a voluntary offer on the market rather than push a nationalisation bill through parliament, with the aim of closing the operation in October-November.”The government may want to offer a sufficient premium to avoid legal challenges and resulting delays to the offer,” JPMorgan analysts said in a note.EDF did not give a reason for requesting the suspension of its shares, which have risen 30% since the nationalisation announcement, increasing the cost of buying out minorities. The finance ministry source said the move was “among routine tools to manage financial markets in this kind of situation”.”I would imagine it is to stop the price going up to a point that the French government ends up having to pay over the odds for the remaining shares in issue,” a London trader said.The shares closed at 10.2250 euros on Tuesday.In a sign of how badly reactor outages are affecting the company, which is expected to post a loss this year, EDF said power generation at its French nuclear reactors fell by 27.1% in June from a year earlier after the discovery of stress corrosion took several sites off line.EDF has said it expects an 18.5 billion euro hit to its earnings in 2022 from production losses, and further losses of 10.2 billion euros from the energy price cap.($1 = 0.9964 euros)Register now for FREE unlimited access to Reuters.comAdditional reporting by Joice Alves in London and Marc Angrand in Paris; Writing by Silvia Aloisi; Editing by Edmund Blair, Jan Harvey, Kirsten DonovanOur Standards: The Thomson Reuters Trust Principles. .
LME zinc price and stocks, Shanghai stocksEUROPEAN POWER-DOWNOne European smelter – Nyrstar’s Auby plant in France – has returned to partial production after being shuttered in January due to soaring power costs. But run-rates across the company’s three European smelters with combined annual capacity of 720,000 tonnes will continue to be flexed “with anticipated total production cuts of up to 50%”, Nyrstar said.High electricity prices across Europe mean “it is not economically feasible to operate any of our sites at full capacity”, it said.Still on full care and maintenance is Glencore’s (GLEN.L) 100,000-tonne-per-year Portovesme site in Italy, another power-crisis casualty.Zinc smelting is an energy-intensive business and these smelters were already in trouble before Russia’s invasion sent European electricity prices spiralling yet higher.Record-high physical premiums, paid on top of the LME cash price, attest to the regional shortage of metal. The premium for special-high-grade zinc at the Belgian port of Antwerp has risen to $450 per tonne from $170 last October before the winter heating crisis kicked in.The Italian premium has exploded from $215.00 to $462.50 per tonne over the same time frame, according to Fastmarkets.LME warehouses in Europe hold just 500 tonnes of zinc – all of it at the Spanish port of Bilbao and just about all of it bar 25 tonnes cancelled in preparation for physical load-out.Tightness in Europe is rippling over the Atlantic. Fastmarkets has just hiked its assessment of the U.S. Midwest physical premium by 24% to 26-30 cents per lb ($573-$661 per tonne).LME-registered stocks in the United States total a low 25,925 tonnes and available tonnage is lower still at 19,825 tonnes. This time last year New Orleans alone held almost 100,000 tonnes of zinc.
Fastmarkets Assessments of Antwerp and Italian physical zinc premiumsREBALANCING ACTAbout 80% of the LME’s registered zinc inventory is currently located at Asian locations, first and foremost Singapore, which holds 81,950 tonnes.There is also plenty of metal sitting in Shanghai Futures Exchange warehouses. Registered stocks have seen their usual seasonal Lunar New Year holiday surge, rising from 58,000 tonnes at the start of January to a current 177,826 tonnes.Quite evidently Asian buyers haven’t yet been affected by the unfolding supply crunch in Europe and there is plenty of potential for a wholesale redistribution of stocks from east to west.This is what happened last year in the lead market, China exporting its surplus to help plug gaps in the Western supply chain. Lead, however, should also serve as a warning that global rebalancing can be a slow, protracted affair due to continuing log-jams in the shipping sector.MOVING THE GLOBAL DIALWhile there is undoubted slack in the global zinc market, Europe is still big enough a refined metal producer to move the market dial.The continent accounts for around 16% of global refined output and the loss of production due to the regional energy crisis has upended the zinc market narrative.When the International Lead and Zinc Study Group (ILZSG) last met in October, it forecast a global supply surplus of 217,000 tonnes for 2021.That was already a sharp reduction from its earlier April assessment of a 353,000-tonne production overhang. The Group’s most recent calculation is that the expected surplus turned into a 194,000-tonne shortfall last year. The difference was almost wholly down to lower-than-forecast refined production growth, which came in at just 0.5% compared with an October forecast of 2.5%.With Chinese smelters recovering from their own power problems earlier in the year, the fourth-quarter deceleration was largely due to lower run-rates at Europe’s smelters.The ILZSG’s monthly statistical updates are inevitably a rear-view mirror but Europe’s production losses have continued unabated over the first quarter of 2022.Moreover, the scale of the shift higher in power pricing, not just spot but along the length of the forward curve, poses a longer-term question mark over the viability of European zinc production.A redistribution of global stocks westwards can provide some medium-term relief but zinc supply is facing a new structural challenge which is not going away any time soon.The opinions expressed here are those of the author, a columnist for Reuters.Register now for FREE unlimited access to Reuters.com