Two things you probably never thought of as green: nuclear power and Electricite de France. Yet both are considered to be ecologically correct these days, and the former is giving the latter a nice boost in the stock market.
Shares in EDF had already climbed 4% on Wednesday, following news that it was one of six utility companies--including Iberdrola (other-otc: IBDRY - news - people ) and British Energy--to support fellow French company Areva's application for a nuclear reactor license in Britain.
On Thursday, analyst ratings continued to boost EDF's share price, with UBS maintaining its "Buy" rating and revising its price target up to 100 euros ($133.81) from 80 euros ($107.05). EDF closed up 2.52 euros ($3.38), or 3.4%, to 76.62 euros ($102.64). Areva, which jumped 35.35 euros ( $46.86) on Wednesday, gave back 19.25 euros ($25.78), or 2.34%, to 802 euros ($1,073.89) on Thursday.
"EDF has a generation portfolio made up in the majority of clean assets with a long remaining life," said UBS analyst Per Lekander in a note to clients. 70% of the company's output comes from its nuclear plants, and Lekander added that "the first plants are not expected to close until 2030."
EDF's relationship with Areva will contribute to returns on nuclear energy. Areva is building a European Pressurized Reactor for the French utility company in France, which will be operational in 2014, and has applied for a license to build another in Britain, which would also be run by EDF.
The new-model reactors have life expectancies of 60 years, according to Areva, far more than the 40 years for plants built in the 1970s. Outside of France, nuclear power has not been popular since then, thanks in part to the incidents at the Three Mile Island plant in Pennsylvania in 1979 and Chernobyl in Ukraine in 1986.
France, however, has remained a significant user of nuclear power, which provide about 78% of its electricity. Other than hydropower from the Alps on its eastern border, France does not have the natural resources to generate its own power from conventional sources. The French government maintains a strong interest in its nuclear industry, holding 90% of Areva and 87% of EDF.
EDF has awarded a 100 million euro contract to Areva for the modernization and maintenance of 34 nuclear reactors in France that are between 20 and 30 years old.
UBS' Lekander said that increasing the capacity of existing plants could be done at a low price, "around 100 euros [$134] per kilowatt," compared with the 2,150 euros ($2,878) cost of building a new plant. "Together with the new nuclear plant coming on line in 2014," he said, "we estimate the pretax earnings upside in nuclear to be 3 billion euros [$4.0 billion]."
EDF's net income last year was 6.7 billion euros ($9 billion). The company operates the world's largest nuclear portfolio, with a global generation of 125 gigawatts.
