The nationalization of EDF, an “inevitable” measure to ensure the French nuclear program

The nationalization of EDF, an “inevitable” measure to ensure the French nuclear program

In the light of EDF’s difficulties, many observers were already advocating the nationalization of the French energy company, even before the government made the announcement. For EURACTIV, Professor Jean-Michel Gauthier reconsiders a decision which was, according to him, ” inevitable “.

Last Wednesday (July 6), when the government was announced, the opposition remained cautious. The United Left (NUPES) demands that the government provide social guarantees, while the far right castigates a useless measure, since the State already holds 84% ​​of the capital of the company.

Be that as it may, for Professor Jean-Michel Gauthier, Director of the Energy & Finance Chair at HEC Paris, the “nationalization” of EDF – or rather its “delisting” since there is no question for the time being of reconsidering the company’s status as a public limited company — was ” inevitable “.

According to him, the decision could not be delayed, given the millefeuille of regulatory and economic constraints imposed on it by the State for more than 15 years” and the nuclear stimulus program announced by Emmanuel Macron during the presidential campaign.

ARENH, redemptions, tariff shield, …

Among the constraints, the regulated access to historical nuclear electricity (ARENH) concentrates the debates. This system requires EDF to sell part of its nuclear electricity to the competition at a fixed price (€42/MWh), then to buy it back on the markets like any supplier.

However, due to the health crisis and the war in Ukraine, the current market price easily exceeds €200/MWh, according to the French electricity network operator RTE.

Consequently, EDF sells at a loss, in order to fuel competition. A real aberration according to the unions and many observers who denounce the “looting” of the French electrician.

Another constraint: the purchase of 75% of the shares of Framatome (ex-Areva NP) for a price well above expectations. A trend that is true for other redemptions.

Finally, the State has recently asked EDF to pay the bill for the “tariff shield” (8 billion euros) which makes it possible to limit the rise in energy prices for individuals in these times of crisis.

For all these reasons and more, the company’s market capitalization has collapsed in just a few years, dropping from more than 150 billion euros in 2007 to less than 40 billion today.

Added to this is a debt of more than 43 billion euros, fueled by delays in the construction sites of its new fourth-generation reactors.

Socialize losses?

Despite these challenges, Pr. Gauthier ensures that the exit from the energy company’s listing does not have the character of a “socialization of losses” which the taxpayer would pay the price for.

In view of the fall in the company’s market capitalization, disgruntled investors did not wait for the government’s announcement to jump ship, he says.

In addition, the professor insists: “pAmong the holders of EDF debt, there is not one who trembles”Insofar as “the state will never let down a former world leader and its quasi-unique” utility company. Therefore, default by the State is highly unlikely.

Better still, in the case of a 100% stake in the capital of the company, its debt capacities will be reinforced and accessible at lower rates.

” For me, [la dette] is not at all the subject »he asserts, judging that it is even “irrelevant, with regard to the major subjects of energy and industrial policy in France”.

Grand Carénage, new reactors

According to him, the main challenges are therefore elsewhere. The company must indeed carry out several large-scale programs, such as that of extending the life of current nuclear power plants.

The cost of this program called “Grand Carénage” is estimated at more than 50 billion euros by 2030, excluding operating costs.

The energy company must also ensure the implementation of the projects of the President of the Republic who announced in November that he wanted to build six new fourth generation reactors of the EPR type. Cost of the operation: between 50 and 60 billion euros according to estimates.

Together, these two programs would thus cost EDF 100 to 110 billion euros, which could raise a “some fear” as to whether the state “will have a clear vision” alone at the head of the company, says Professor Gauthier.

“These are the major issues: what about the EPR 2, 3rd generation reactors, the ASTRID project and small modular reactors (SMR) ? »he says, wondering about the State’s ability to assume the means of its ambitions.

What to do with renewables?

In addition, these projects only concern nuclear energy and in no way respond to questions about EDF’s ability to ensure the deployment of renewable energies, the government’s other major priority.

“Today, given the bubble around green finance, there is no reason for the state to own solar or wind capacity”, says Prof. Gauthier.

“So we can imagine [que l’on] back to square one […], that is to say that the State puts on the market the portfolio ofEDF Renewables, a wholly-owned subsidiary of EDF »he says.

A project which, if confirmed, could revive the hostility of the unions towards the State and its Hercule project of division of the activities of the energy company.

For the time being, the CEO of the company, Jean-Bernard Lévy, assured on BFM TV on Monday (July 11) that it was necessary “keep a single EDF”. The number 1 energy company without renewables would be a dark “utopia”he shouts.

Thus, whether it is a question of the deployment of its nuclear program or the revival (or not) of the debates on the division of the activities of the energy company, the State must be the “single driver” on board and the “sole decision maker” concludes Professor Gauthier.

[Edité par Frédéric Simon]

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