The French government plans to pay nearly €9.7 billion ($ 10 billion) to fully nationalise debt-laden, state-controlled energy provider EDF (Électricité de France) in a bid to secure domestic supplies amid the energy crisis engulfing Europe.
The French finance ministry confirmed today (July 19) that it will offer €9.7 billion or €12 a share to buy 6% of EDF. The French state already owns 84% of the company.
Earlier this month, the country's prime minister Élisabeth Borne announced the decision to fully nationalise the company.
"We must have full control over our electricity production and performance," Borne informed parliament on the government's intention to own 100% of EDF's capital.
EDF's nuclear production accounted for nearly 70% of France's electricity supplies in 2021. However, this supply level is expected to fall to a multi-decadal low this year due to a combination of outages due to plant maintenance, refuelling, corrosions problem and ongoing pipe repairs at 12 reactors. The projected fall in supply comes at a time when energy prices in Europe have soared to a record high, exacerbated by Russia's invasion of Ukraine.
Cap On Energy Pricing Dents EDF Finances
EDF took a hit after the French government imposed price caps on energy bills to protect households from soaring energy costs.
To address the cost of living crisis, earlier this year, the French government capped energy bill hikes to 4% in 2022, forcing the state energy giant to take an €8.4bn financial hit. EDF was directed to sell electricity generated by its fleet of nuclear reactors to rival home suppliers at well below the current record high market prices.
Following the announcement of the government's plan to cap energy bills, the company lost a fifth of its market value forcing.
Macron's 'Nuclear Renaissance Plan' To Build 14 New Reactors
The French government also believes that the company is critical to its plan to meet energy security.
In February this year, French President Emmanuel Macron announced a programme to build as many as 14 new reactors, arguing that it would help end the country's reliance on fossil fuels and make France carbon neutral by 2050. EDF will be building at least 6 of these new reactors at an estimated cost of €52 billion.
France also spearheaded the efforts within the EU to secure a green label for nuclear power despite stiff opposition from Austria and scepticism from Germany, which is already implementing a roadmap to shutter all nuclear plants by the end of 2022.
In an attempt to diversify its supplies, France recently finalised a long-term energy deal with the United Arab Emirates for fuel and gas supplies. France is moving to reduce its dependency on Russian gas, which accounted for about 17% of its gas supplies before the war.
It remains to be seen if recapitalisation and complete nationalisation will help EDF, which already faces delays and budget overruns in constructing new nuclear plants in France and Britain.
Originally a fully-owned entity of the state, EDF was partly privatised in 2004, following France's integration into the Common European market. The French state retained 84% equity. In 2017 EDF took over most of the reactors owned by troubled nuclear energy firm Areva in a French government-brokered restructuring deal.
As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.
Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.
We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.
Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.