• Separate nuclear unit could benefit from regulated prices
  • Power price is too low to fund EU50 billion of plant upgrades

Electricite de France SA is considering moving its fleet of 58 French nuclear reactors -- the world’s largest -- into a separate corporate entity where regulated power tariffs could protect cash flows against falling wholesale prices, said two people familiar with the matter.

The split could help the state-run utility generate the 50 billion euros ($55 billion) needed by 2025 for safety upgrades and life extensions at its French atomic fleet, which the company cannot afford at current electricity prices, the people said. EDF thinks the European Commission would be more likely to approve regulated minimum prices for a separate nuclear unit, leaving EDF’s other assets such as gas-fired plants exposed to the wholesale market, one of the people said.

Discussions are at a very early stage and there hasn’t been a formal proposal to the executive committee or board, the person said. EDF’s media department declined to comment.

Electricity prices have plunged in Europe after government subsidies for renewable energy, efficiency gains and sluggish economic growth resulted in generation overcapacity. Wholesale power in France is down 30 percent this year and EDF is struggling to contain its debt, while also seeking ways to fund two new reactors in the U.K. The company’s credit rating was placed on watch for possible downgrade by Standard & Poor’s on Friday, alongside other European utilities such as EON SE.

New Regulations

EDF is working with the government on new regulations for the French market. Getting the right rules “will depend on the support that we need from the French government and the understanding that we need from the EU and from all regulators,” Chief Financial Officer Thomas Piquemal said when the group presented earnings on Feb. 16.

The European Commission has given its blessing to the state guarantees that underpin EDF’s plan to build two reactors at Hinkley Point in the U.K. The British government offered to buy electricity from the plants at a price that is more than double the current market rate under a 35-year contract.

EDF Chief Executive Officer Jean-Bernard Levy urged the European Union this month to rapidly establish a “significant” minimum price for carbon dioxide to encourage investment in generation facilities that don’t use fossil fuels, such as nuclear plants. Market deregulation in Europe has led to a lack of investment, he said.

With electricity selling for 28 euros per megawatt-hour, Piquemal questioned why it would be worthwhile for EDF to invest in a large renovation of its nuclear fleet.

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