EDF: the private shareholders of the public energy giant learn the hard law of investee companies
It is usually believed that investing money in an energy or similar service company is a surefire way to have a stable return without major risks. Unfortunately with EDF, the French state electricity company, this was not exactly the case. Participated by the French state, but also by private individuals, EDF had a drop in value of 17%
this vertical decline was due to the fact that President Macron unilaterally decided to put a ceiling on energy prices, in the face of the explosion in electricity prices also taking place in France.
In this way, the Democrats have learned, directly and on their skin, the main laws that govern energy companies with state participation:
Law 1 — Government controlled companies, despite having thousands of private shareholders, are government agencies and act according to the directions of politicians. This can mean taking actions that disadvantage all shareholders, including the government, if those actions are good for the politicians in office. You can easily see that pattern by looking back at Teléfonos de Mexico or Petrobras or Gazprom or any state controlled company in China.
Law 2— Politicians like competitive markets as long as these markets produce stable or falling prices. They dislike competitive markets which produce higher (especially significantly higher) prices for commonly used goods and services. For the market to work, manufacturers must compensate for periods of low prices and margins with periods of high prices and margins to make a reasonable profit over time. If the government cuts the top of each price cycle obviously what will happen to the profits? The UK government capped retail energy prices some time ago and a number of energy suppliers have gone bankrupt.
Then there are also states, like Italy, where the state serves the interests of private shareholders, but these are exceptions that confirm the rule. EDF tries to save face by stating that “It will see how to defend the interests of its shareholders”. Meanwhile, he has to pay.
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The EDF article : private shareholders of the public energy giant learn the harsh law of investee companies comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/edf-gli-azionisti-privati-del-colosso-pubblico-energetico-imparano-la-dura-legge-delle-partecipate/ on Tue, 18 Jan 2022 07:00:49 +0000.