By Inti Landauro

PARIS--Electricite de France SA (EDF.FR) shares tanked Thursday after the French power utility warned its profitability in 2017 would be much lower than 2016 as a result of falling electricity prices.

The company said its earnings before interest, depreciation, taxes and amortization would fall at least 12% in 2017 from its 2016 forecast of between 13.7 billion euros ($14.6 billion) and EUR14.3 billion.

EDF's shares were down 12% in morning trading at EUR9.86 euros, erasing almost EUR3 billion of its market capitalization.

The company attributed the forecast decline in profitability to lower electricity prices in its two main markets, France and the U.K. EDF had already revised its profitability target for 2016 twice over the past months.

The new target for 2017 is 10% below market expectations, brokerage Bryan Garnier & Co. said in a note.

The profit warning is a blow for shareholders, who have seen the value of the company decline by more than 27% over the past 12 months.

The company has recently embarked on expensive projects that are deemed a political priority.

The French government, which owns about 85% of EDF, pressured the company to take a majority stake in beleaguered nuclear-reactor manufacturer Areva NP. The government also pushed EDF to make the final investment decision to build the 18 billion pound ($23 billion)-Hinkley Point project in the U.K., which will leave it with a heavy debt load.

Despite setting a lower profitability target in 2017 than in 2016, the company maintained its goal for 2018. This was seen as unrealistic by Oddo Securities, which expects EDF to abandon the 2018 goal in the coming months.

The company said its board had approved the sale of a 49.9% stake in its grid-operation unit RTE to state-owned investment fund Caisse des Depots et Consignations, as well as the EUR4 billion capital increase unveiled a few months ago.

Write to Inti Landauro at inti.landauro@wsj.com

(END) Dow Jones Newswires

December 15, 2016 06:50 ET (11:50 GMT)

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