Electricite de France SA scored a 290 million-euro ($323 million) court win against French tax authorities, a welcome development for the utility after a record share-price slump on government plans to force it to sell more power at a steep discount.
The Versailles administrative court of appeals ruled Friday that tax officials had wrongfully increased the interest rate applicable to 3.3 billion euros’ worth of convertible bonds issued by U.K. unit EDF Energy Ltd and subscribed to by French subsidiary EDF International SAS. As a result, judges in two separate rulings this week cut EDF International and EDF’s taxes for the years 2009-14, reversing the utility’s previous losses at a lower court.
The dispute centered on whether EDF was allowed to apply a discount to the usual rate for conventional bonds to take into account the cost of conversion. By increasing the interest rate, the tax administration had raised the profits collected annually by EDF International and its taxable basis.
Both EDF representatives and the French tax authorities declined to immediately comment on the ruling.
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The win comes as EDF is increasingly seen as a risky bet for investors. The utility plunged by the most on record earlier this month as the French government confirmed plans to cap an increase in household energy bills at 4% this year amid surging wholesale electricity prices, in a move that could cost the company around 8 billion euros.
EDF shares pared some earlier losses following the news, and were trading down 1.3% at 1:30 p.m in Paris.
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