France’s Prime Minister Élisabeth Borne has announced plans to fully renationalise nuclear power utility company EDF in a bid to stabilise the company’s finances.
As she laid out her political programme before the Assemblée nationale yesterday (July 6), Ms Borne said that the government needed to “ensure our sovereignty faced with the consequences of the war [in Ukraine] and the colossal challenges ahead.”
“That is why I confirm today the government’s intention to hold 100% of EDF’s capital,” she said.
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Electricité de France (EDF) was created in 1946 and is currently 83.68% owned by the state, with the rest being held by institutional investors and employees.
EDF put 15% of its capital on the French stock exchange in 2005, with shares valued at €32.
On Tuesday, they were valued at €7.80, with a debt totalling €43billion.
This figure – including outgoings such as rent and the effect of the electricity price cap – could reach €96billion by the end of 2022, according to American credit rating agency S&P Global Ratings.
However, after Ms Borne’s speech yesterday, EDF shares rose by 14.53% to €8.98, giving the company a value of €34.7billion at the end of yesterday.
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Renationalising EDF will also enable the government to proceed with plans for the development of France’s nuclear power industry. Of EDF’s 56 reactors, 12 are currently not in operation because of issues with corrosion and this is impacting France’s ability to produce electricity.
“This change will enable EDF to reinforce its capacity to lead, as soon as possible, ambitious and vital projects for the future of our energy production,” Ms Borne said.
The state is aiming to build six newréacteurs européens à eau pressurisée (EPR or pressurised water reactor) by around 2035-2037, at a cost of €60billion.
France’s government will also have to pay €5-7billion to shareholders in order to take the privately-owned portion of the company out of the stock exchange.
How will the state renationalise EDF?
Ms Borne did not give further details on when the renationalisation would be finalised, or how it would be done.
The process may prove complicated: President Emmanuel Macron has already tried to nationalise the company once during his first term in office, when he proposed his ‘Hercule’ plan, later renamed ‘Grand EDF’.
The aim of this project was to split the company into three separate companies: EDF bleu, focused on nuclear energy, EDF green, focused on renewable energy and EDF azur, focused on hydraulic power.
This plan was rejected by the opposition, unions and the European Commission, and was eventually abandoned last summer.
Now, the government could choose to introduce a new nationalisation bill but this could be blocked by opposition parties, especially in view of Mr Macron’s lack of absolute majority.
The state is therefore likely to seek an alternative way of obtaining the 16% of EDF that it does not already own.
Will customer bills go down?
In May, EDF had 26.2 million customers in France, 500,000 more than a year ago.
More people have been opting for the regulated rates of the national energy supplier recently because of issues such as the war in Ukraine provoking sharp price rises on the global market, and therefore higher bills for those on alternative tariffs indexed on market rates.
Renationalising EDF will enable the government to fully control the company’s tariffs, which could benefit consumers if it decides on similar policies to this year’s electricity price cap.
The state will have the power to immediately intervene when international events affect prices, and Emmanuelle Galichet of the Conservatoire national des arts et métiers (CNAM) has said that it will have “real dominance over prices”.
However, this will depend on the international context, and so it cannot yet be known how the renationalisation will affect prices.
How have unions reacted?
“If the state wants to possess 100% of EDF, it is in order to open the way to dividing up the company,” said Fabrice Coudour of the CGT EDF union. “[They] are distracting the attention of Parliament by talking about sovereignty, while it is [actually] a matter of the first step towards dismantling the group.”
Alexandre Grillat of the Fédération CFE Energies, for his part, commented: “it is not by renationalising [EDF] that they will reinforce its financial position; it will not resolve its structural problems.”
Changes to the ownership of EDF will not affect the wider French electricity market; alternative suppliers will continue to exist.
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