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France plans to fully nationalize the EDF electricity utility

France plans to fully nationalize the EDF electricity utility

PARIS, July 6 (Reuters) – France has fully nationalized EDF (EDF.PA)Prime Minister Elizabeth Born said on Wednesday, in a move that would give the government more control over the debt-laden group’s restructuring while facing the European energy crisis.

EDF, in which the state already owns 84%, is one of the largest facilities in Europe and is at the heart of France’s nuclear strategy, which the government is counting on to cushion the impact of rising energy prices exacerbated by the possibility of a sudden stop in Russian gas supplies.

But rather than being in the hands of the government, it has become a major nuisance due to years of delays in building new nuclear plants in France and Britain, with budget overruns of billions of euros.

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“I assure you today that the state intends to control 100% of the EDF capital,” Bourne said in her House policy address as she outlined the minority government’s priorities. Read more

“We need to ensure our sovereignty in the face of the war (in Ukraine) and the huge challenges looming on the horizon.”

At current market prices, buying the stake that the government does not already own would cost around €5 billion ($5.09 billion).

EDF has faced a series of problems this year. Half of its aging reactors in France are currently out of order, in part due to corrosion problems, forcing it to repeatedly cut nuclear production at a time when Europe is scrambling to find alternatives to Russian gas supplies.

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Utilities have also been hit by government moves that have forced them to sell energy to competitors at a discount as part of efforts to protect French consumers from a sharp increase in the cost of living.

This puts significant strain on EDF’s finances because the group sells its estimated nuclear production before the end of the budget year and has to buy back electricity sold in a volatile market at historically high prices.

The company says production losses will reduce its core profit this year by 18.5 billion euros and discounted energy sales will cost it another 10.2 billion euros. Its debt is expected to rise by 40% this year to more than 61 billion euros. Meanwhile, planned new generation nuclear reactors require investments of more than 50 billion euros.

President Emmanuel Macron had signaled the option to fully nationalize the EDF earlier this year, but the picture has since become more complicated as he lost his absolute majority in Parliament.

He was already forced to scrap a massive overhaul of EDF last year in the face of union opposition and skepticism voiced by the European Commission.

That plan envisages placing EDF’s profitable renewable energy business into a new company free from debt-laden nuclear assets.

Borne did not specify whether the nationalization would be implemented through private legislation or through a public tender to buy out minority shareholders, and did not provide a timeframe.

The CGT said that without a fundamental overhaul of the way nuclear energy prices are set, the nationalization of the EDF will not address its problems and may be an excuse to dismantle it.

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EDF was listed on the Paris Stock Exchange in 2005 at 33 euros per share. Its stock closed at just under €9 on Wednesday, after jumping 14.5% after Bourne’s announcement.

Analysts and bankers said that going straight to the market to put pressure on minorities and delisting the EDF would be a faster process, while any legislation is at risk of stalling in parliament.

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Written by Sylvia Aloisi Editing by Jason Neely, David Goodman and Margarita Choi

Our criteria: Thomson Reuters Trust Principles.