France Sees Reasonable Chance of EU Deal on EDF Within Weeks
(Bloomberg) -- France sees a “reasonable chance” of getting approval from the European Commission for new power-market regulations that would help Electricite de France SA reduce debt and invest more in renewables.
The state-controlled nuclear giant has long complained that regulated prices for its French power sales to rivals don’t allow it to finance the mounting cost of reactor maintenance and investments in renewables. With price reform, EDF would be better able to compete in Europe as other utilities expand market share and oil majors enter the clean-energy space.
France expects to find out in the coming weeks whether talks with the commission have been successful, government officials told reporters on condition of anonymity. Progress has been made, though key details regarding levels of state aid and EDF’s reorganization have yet to be agreed, they said.
The shares of EDF rose as much as 11.4% in Paris Thursday, and were trading 11% higher at 10.98 euros at 4:04 p.m.
At the heart of the negotiations is a mechanism that gives EDF rivals -- which include Total SE and Engie SA -- the option to buy more than a quarter of its French nuclear output at a price that has remained unchanged since 2012.
The former French electricity monopoly and the government are seeking a higher price because of rising maintenance spending on EDF’s aging nuclear plants, which account for more than two-thirds of the country’s power output.
EDF Chief Executive Officer Jean-Bernard Levy and Finance Minister Bruno Le Maire have expressed concern that the commission, whose role includes maintaining fair competition in the European Union, wants to break up the utility to ensure that a higher power price doesn’t give it an undue advantage.
There’s still no certainty of an agreement with the commission because France wants to ensure that EDF remains a single group, the officials said. They declined to comment on what the government and EDF would do if talks fail, while pointing out that the current nuclear regulations would remain in place, possibly until they expire at the end of 2025.
Talks between France and the Commission are continuing around so-called Chinese walls that would be required between various entities, and to what extent EDF’s various businesses would continue to share support functions, the government officials said.
Provided it gets approval for a satisfactory regulation, Levy has said most of EDF’s non-nuclear businesses would be placed in an entity that would be majority controlled by the parent company. To boost investment in renewables, EDF could list as much as 30% of that entity, which would include EDF’s wind and power assets, its power-distribution unit, and its retail division, he said.
Discussions between France and the Commission are also continuing over the new regulated price of EDF’s nuclear output, which would apply to the entire atomic production, according to the government officials. The country is seeking to get an agreement in the coming weeks to be able to implement the reform ahead of next year’s Presidential elections, they said.
France and the Commission have also made progress in solving a tussle over EDF’s hydropower concessions that have expired, the officials said. EDF would place its hydro unit in a quasi-government entity, which wouldn’t be consolidated in the utility’s accounts. EDF would still receive dividends from its hydro business, they said.
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