French energy giant EDF has reduced its annual profit outlook, pointing to the impact of rising wholesale power prices and falling nuclear generation.

In a decree to the French Government on Monday, EDF reassessed the cost of the government’s mandate to raise power prices by less than the rise in wholesale prices. The company originally expected this to reduce the company’s raw earnings (EBITDA) by €8.4bn ($9.2bn). At current power prices, it now expects losses of €10.2bn ($11.18bn).

The company also increased its estimates of power sales. Artificially low power prices mean that the company will now need to sell 120TWh across 2022 to cover the costs of purchased power. This represents a 20TWh increase to previous estimates.

Furthermore, EDF also accounted for an expected decrease in nuclear generation in 2022. The company now expects to generate between 295TWh and 315TWh of nuclear power this year. As a result, the decree says that, based on current power prices, “the estimate of the impact of the decrease in output on the group’s EBITDA for 2022 is reassessed at approximately -€16bn (-$17.5bn)”.

Despite this, the company will maintain its annual gearing ambitions. EDF plans to move its net debt to raw earnings ratio to approximately three times, with a net debt to adjusted earnings ratio of approximately 4.5 to five times. At the same time, it warns that necessary works on its fleet of power plants could prevent it from achieving this, as well as the “scale and variety of the risks the group is facing”.

The decree continues: “Moreover, the impacts of the Ukrainian conflict and associated geopolitical tensions on all-kind risks are difficult to quantify.”

The French Government owns 80% of EDF and faces an election in April. In January, it mandated that EDF should absorb most of the price rises of wholesale power. While prices in other countries rose by more than 50% at around the same time, EDF increased prices by 4%. This has caused the company to make significant losses on wholesale power contracts.

Reacting to the news, EDF’s share price took a slight dip of approximately 1%. Most losses from price rise decision were absorbed in January, when EDF’s share price fell by almost 20%.