French power company EDF has posted higher annual profits but disappointed investors with a profit forecast suspected to be over-optimistic as de-regulation of the French market kicks in.
The former French monopoly is being forced to sell up to a quarter of its domestic nuclear output to competitors to help open up markets.
Traders said EDF's 2011 profit target was based on a maximum price of €42 (£35.37) per megawatt hour (MWh) the government could set for nuclear power production, which EDF will have to sell as part of a French liberalisation law.
"€42 is the ceiling of the possible outcomes," said one trader.
Rival GDF Suez has asked for €35 euros per MWh.
The price is expected to be set in April or May, and will come into effect on July 1.
Every euro below the €42 demanded by EDF would have a negative EBITDA impact of €40m for the second half of the year, chief financial officer Thomas Piquemal estimated in a conference call with journalists.
EDF shares fell as much as 1.7 per cent in trading in a slightly firmer market.
The shares fell despite forecast-beating 2010 core earnings driven by higher available nuclear capacity at the world's largest single producer of atomic energy.
EDF posted a 4.4 per cent rise in 2010 earnings before interest, tax, depreciation and amortisation (EBITDA) and forecast a rise of between four and six per cent this year.
The world's second largest utility group after GDF Suez said core earnings came in at €16.62bn last year – up from €15.93bn in 2009 and the €16.45bn average forecast of a Reuters poll.
EDF, which sold €20bn of assets in the past year, said it would continue to invest in France and intends to capitalise on renewed global interest in atomic power.
City A.M. Reporter