French Hydropower Delays Will Cost Hundreds of Millions of Euros

Delays in opening French hydropower contracts to competition will cost local governments hundreds of millions of euros in royalties, the state auditor said.

The stalled introduction of competitive bidding to operate dams is “generating a growing shortfall in public finances,” Cours des Comptes said today. Potential candidates are being discouraged amid “an absence of clear government strategy.”

Hydro plants, the biggest source of power after nuclear, are run by former monopoly utilities Electricite de France SA and GDF Suez SA. (GSZ) President Francois Hollande, amid opposition from lawmakers in his Socialist party to bidding, has avoided deciding whether to go ahead with predecessor Nicolas Sarkozy’s plans to tender plants with total output of 5,300 megawatts.

The cost will be about 50 million euros ($66 million) this year and reach 100 million euros in 2020, the auditor said in a report. The accumulated loss through 2020 will be more than 250 million euros if contracts are opened up in 2016 and 600 million euros otherwise, it said. Tenders won’t happen before the end of 2016 even if Hollande decides this year to go ahead, it said.

EDF operates 80 percent of France’s hydroelectric capacity and GDF Suez 12 percent. The dams produce about 60 terawatt hours a year with annual potential sales of 3 billion euros and royalties of 520 million euros, according to the report.

“Additional reforms are envisaged, notably about renewing hydroelectric concessions,” the finance ministry said in April in an outline of economic plans for the year.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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