December 15, 2016 / 12:00 PM / 8 months ago

UPDATE 3-EDF shares slump after warning on lower earnings in 2017

* Shares down 12 pct, worst performer on STOXX 600

* EDF forecasts lower 2017 earnings vs 2016

* Stock has now lost 30 pct this year

* Overcapacity, low demand depress power prices (Adds Greenpeace action, background)

By Sudip Kar-Gupta and Geert De Clercq

PARIS, Dec 15 (Reuters) - French utility EDF lost more than a tenth of its stock market value on Thursday after it warned of lower 2017 earnings due to an expected drop in power prices and the impact of regulatory issues on its output.

EDF shares have lost nearly 30 percent this year, and hover just above their lowest levels since their 2005 IPO, as investors have lost confidence in CEO Jean-Bernard Levy's ability to turn around the state-owned firm without outside help and the government has been forced to implement a refinancing plan.

EDF late on Wednesday set a target for 2017 core earnings before interest, tax, depreciation and amortisation (EBITDA) of 13.7 billion-14.3 billion euros ($14.4 bln-$15 bln), compared with analysts' expectations of around 15.8 billion and down from its 2016 target of 16 bln-16.3 bln euros.

The company is suffering from overcapacity in the power markets due to continuing new investment in renewable energy like wind and solar, and is burdened by 37 billion euros of net debt.

The world's biggest operator of nuclear plants, it also needs to finance its 18 billion pound ($22 bln) Hinkley Point C nuclear power project in Britain, as well as an upcoming 50 billion euro upgrade of its ageing nuclear plants and the takeover of Areva's nuclear reactor unit, which will cost several billions.

"Although the company has made progress on its balance restructuring programme, ongoing operational challenges related to the French nuclear fleet along with relatively low power prices make for a tough outlook," Jefferies said in a note.

EDF said its 2017 earnings would be lower because of an expected decrease in French and UK power prices compared to 2016 and because of a legal requirement under which the former monopoly provider is forced to sell up to a quarter of its nuclear production to competitors.

The 2016 target had already been cut twice this year due to low power prices and a string of nuclear reactor outages ordered by French nuclear regulator ASN following the discovery of high carbon concentrations, which could weaken their steel.

About 20 Greenpeace activists, wearing life jackets and carrying life rafts, blocked EDF's headquarters in central Paris on Thursday for a second day, waving signs saying "EDF is going under". Greenpeace argues the company should focus less on nuclear and more on renewable energy.

RECOVERY IN 2018

EDF shares closed down 12.7 percent, making them the biggest loser on the STOXX Europe 600 index.

Barclays said in a note that EDF's EBITDA is likely to hit a trough in 2017 but the group is on track to deliver its medium-term strategic plan with significant opportunities for recovery in 2018.

Gregoire Laverne, fund manager at Roche Brune Asset Management, said he preferred the shares of French utility Veolia.

"EDF once again disappointed with its 2017 outlook," Laverne said.

The utility is looking to sell about 10 billion euros worth of assets by 2020, in an effort to reduce debt and free funds for its 18 billion pound ($23 billion) project to build two nuclear reactors in Britain and to finance its acquisition of the engineering business of troubled nuclear group Areva .

EDF also plans a 4 billion euro capital increase early next year, to which the French government - which owns 85.6 percent of EDF - plans to contribute 3 billion euros. ($1 = 0.9539 euros) ($1 = 0.7978 pounds) (Reporting by Sudip Kar-Gupta and Geert De Clercq; Editing by Andrew Callus and Susan Fenton)

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