EDF’s $1.6 Billion French Tax Measure Faces Renewed EU Probe

Electricite de France SA, Europe’s biggest power generator, faces a renewed probe from the European Commission into whether a 1.2 billion-euro ($1.6 billion) French tax measure constituted illegal state aid.

The move follows last year’s ruling by the European Union’s Court of Justice, which faulted the commission’s analysis in a previous investigation into the French measure that allowed EDF not to pay tax on cash reserves it allocated to renovating the country’s energy grid.

Today’s decision “means extending the scope of the inquiry” to allow the French authorities and others to argue “whether the non-payment of tax could in fact represent an investment, and, if so, whether a prudent private investor would have made a comparable investment,” the Brussels-based EU regulator said.

EDF, which is controlled by the government, is seeking to keep investment stable this year and cut costs in order to improve its balance sheet. The utility is facing billions of euros of spending to improve safety at its 58 French reactors after the country’s atomic authority tightened rules following the 2011 meltdown at the Fukushima plant in Japan.

“EDF will defend its rights and interests,” the utility said in a statement. The shares advanced 1.6 percent to 17.235 euros in Paris trading.

The commission ordered the Paris-based company in 2003 to pay 889 million euros in back taxes plus interest since 1997, when EDF booked a tax concession related to its ownership of France’s high-voltage electricity network. EDF repaid France more than 1.2 billion euros.

EDF appealed to the EU courts in 2004, arguing that the commission made mistakes and forced a repayment far greater than what was due. The EU’s General Court ruled in favor of EDF in 2009. This was appealed by the commission, prompting the 2012 Court of Justice ruling.

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