France proposes to pay $ 9.9 billion for the nationalization of EDF

The government will offer investors 12 euros per share

EDF's problems exacerbate Europe's energy crisis

The French government has offered to pay about 9.7 billion euros ($9.9 billion) for the full nationalization of Electricite de France SA as it seeks to solve problems on the power generator that are exacerbating Europe's energy crisis. 

The state will offer 12 euros per share to acquire 16% of EDF, which it does not yet own, the French Finance Ministry said in a statement on Tuesday. That's a 53% premium to the closed value of €7.84 for EDF shares on July 5, the day before French Prime Minister Elisabeth Bourne announced the nationalisation. 

The proposal will be submitted to Autorite des Marches Financiers by early September with the aim of closing the process by mid-October, according to the Ministry of Finance. 

The company's shares, which had been suspended since July 13 pending details of the plan, jumped 15% to 11.78 euros as of 10:17 a.m. in Paris. 

"We believe that the proposal looks attractive and has a high probability of success," Citigroup Inc. analyst Piotr Dziecelowski said in a note. 

In the midst of Europe's worst energy crisis in a generation, France wants to return the debt-ridden EDF to full state ownership to control household electricity bills, while making huge investments to reduce the country's dependence on imported fossil fuels. 

The French state is best suited to implement the multi-year investment program needed to achieve those goals, a Finance Ministry spokesman told reporters on Tuesday. In a revised budget for 2022 presented to parliament later this week, the state will request 12.7 billion euros of loans to cover the nationalization of the EDF and other possible operations in the coming months and years, the official said. 

The utility's existing reactors are suffering from deteriorating reliability, while construction of new facilities has been halted by delays and cost overruns. This poor performance, combined with the government's electricity price cap, has made EDF's debt burden increasingly unsustainable. 

Nationalization could reassure EDF lenders about the company's financial stability, but it will leave many other challenges for chairman and chief executive Jean-Bernard Levy, who is 67 and will step down in September.

Holders of the company's convertible debt will be offered 15.64 euros for each bond, the statement said. According to a Finance Ministry official, there are no changes to plans to issue EDF bonds immediately.