EDF's American Ambitions Take Quantum Jump

LONDON - The promise of nuclear energy in the United States could lead to another international conquest for French operator Electricite de France, which has more firmly entrenched its existing position in U.S. company Constellation Energy.

Electricite de France (other-otc: ECIFF - news - people ) revealed on Tuesday that it had increased its stake in Constellation Energy (nyse: CEG - news - people ) to 9.5%, from 5.0%, as part of an agreement signed by the two companies back in 2007. As well as providing an outline for a nuclear joint venture between EDF and Baltimore-based Constellation Energy, known as Unistar, the agreement allowed EDF to take a stake of up to 9.9% in Constellation.

A spokesperson for EDF would not comment on the timing of the investment, news of which came after a drop of nearly 15.0% in Constellation's share price over the past month. She was unable to elaborate on whether EDF would increase its stake even further and told Forbes.com that, for the moment, the French utility had simply complied with the limits outlined by the agreement.

Shares of Electricite de France fell 0.7%, or 37 euro cents (52 cents), to 53.13 euros ($75.14), during morning trading in Paris. Constellation Energy was up 1.8%, to $63.99, at the close on Monday in New York, although it is down some 26.6% over the past three months; the stock suffered a harsh sell-off in August after the company admitted it had underestimated its collateral liabilities. (See "Constellation's Star-Crossed Accounting.")

Landsbanki Kepler analyst Ingo Becker said that EDF's investment in Constellation Energy demonstrated the attractiveness of the American market for the French operator, which plans to build and operate four so-called European pressurized water reactors in the United States. This reactor technology is marketed by engineering company Areva (other-otc: ARVCF - news - people ), which came out in support of the Constellation-EDF venture when it was signed.

Becker told Forbes.com that EDF shares were currently undervalued by the market by some 50.0%; he recommended a price target of 111 euros ($157) per share, largely based on the potential for higher power prices.

EDF is also ramping up its nuclear expansion in South Africa, China and Great Britain; it is reportedly still in takeover discussions with British Energy (other-otc: BEYGF - news - people ).