By William Horobin 

PARIS--Shares of French state-controlled power utility Electricité de France SA, or EDF, plunged on Monday morning on the first day of trading after the company unveiled a plan to raise EUR4 billion ($4.5 billion) by selling new shares.

Shares of EDF were trading at EUR11.33 by mid morning, down 7.5% compared to the share price at market close on Friday.

On Friday, the company announced a capital increase and confirmed a plan to sell EUR10 billion worth assets to strengthen its balance sheet ahead of a series of expensive new projects that the French and British governments deem priorities.

The cash injection and asset sales are aimed at helping the French utility company address investor concerns about its capacity to embark on the projects with an already hefty EUR37.4 billion net debt.

Investors have worried that EDF won't be able to plow capital into projects like the purchase of a majority stake in beleaguered state-owned nuclear reactor maker Areva NP and finance the $26 billion construction of a nuclear plant in Hinkley Point in southern England.

No matter how big it may sound, the capital increase won't have significant impact on EDF's financing ability, said Kepler Cheuvreux brokerage in a report.

Beside the acquisition of Areva and the Hinkley project, the company also needs to finance the upgrade of its 58 nuclear reactors in France and the long-term handling of nuclear waste in an adverse electricity market, Kepler Cheuvreux said. It recommends to sell the shares.

The French government, which owns 85% of the firm, said on Friday that it would inject EUR3 billion as part of the share sale, slightly diluting its stake.

In February, EDF had its credit rating put on review for a downgrade by Moody's Investors Service. The capital increase will likely avoid a rating downgrade in the short-term, Kepler Cheuvreux said.

Many top officials at EDF have questioned whether the company's finances can handle the Hinkley Point investment. Although the U.K. government has tried to assuage concerns by pledging to buy the electricity generated at Hinkey Point for around three times the current market price, EDF officials are worried the project will saddle the company with too much debt. Former CFO Thomas Piquemal quit over the issue.

Chief Executive Jean-Bernard Levy on Monday dismissed the critics and said the company would go ahead with the project, which is essential for the company to remain a top nuclear player in the world.

The Hinkley Point project is the centerpiece of a series of business deals between the U.K. and China announced last year, with China General Nuclear Power Corp. agreeing to take a 33.5% stake in it.

Write to William Horobin at William.Horobin@wsj.com

(END) Dow Jones Newswires

April 25, 2016 07:01 ET (11:01 GMT)