France to Debate Extension for EDF in Amortizing Atomic Reactors

The French government is considering a possible extension of the period that Electricite de France SA is able to amortize its nuclear reactors in preparing corporate accounts, according to Finance Minister Pierre Moscovici.

The minister, on France Inter radio today, denied a Journal du Dimanche report that a decision had been made to lengthen the period to 50 years from 40 years. “Debate will take place that will be based on technical considerations,” Moscovici said.

EDF spokeswoman Carole Trivi declined to comment.

A change, allowing EDF to reduce provisions for dismantling installations, was mooted by Environment Minister Philippe Martin last month as a way for nuclear power to contribute to developing renewables. The extension would add value to the biggest nuclear operator by improving its earnings and cutting debt, according to Louis Boujard, an analyst at Banco BPI SA.

EDF rose 2.2 percent to 25.05 euros by the close in Paris.

“The impact of a lifespan extension would be positive on recurring earnings potential of EDF and would trigger a further deleveraging of the company,” Boujard said in a note. Extending to 51 years would add 5 euros a share to the company, he said.

The valuation would increase by 13.8 euros a share with an extension to 50 years, Martin Young, an analyst at RBC Capital Markets, said in a report last month, though that effect would be lowered by “benefit sharing” with the state or customers.

Increasing Renewables

“The nuclear activity of EDF through amortizations that are already over long periods will provide sums that could be used by the state as shareholder,” Minister Martin said. Funds may help boost French energy efficiency and renewables, he said.

The Commission de Regulation de l’Energie regulator said in a study in June that extending amortization would have “large and lasting consequences” for electricity production costs as well as a one-time financial advantage for the utility.

Amortization was pushed to 40 years from 30 years in 2003. An extension to 50 years would allow EDF to cut provisions, the regulator said. It may also curb state-set tariff increases.

While EDF is seeking to operate its French reactors for 60 years, the regulatory system doesn’t allow for the government to simply extend the operating lives. Autorite de Surete Nucleaire, the atomic regulator, carries out in-depth inspections on each reactor every 10 years, granting permission on a case-by-case basis depending on its findings. The regulator is also able to order the shutdown of a reactor on safety considerations.

“We are a long way from making a decision” on extending beyond 40 years, Pierre-Franck Chevet, head of the ASN, told parliament in April. “We are at the very beginning.”

EDF must improve safety including ensuring spent fuel storage and reactor vessels are secure before it gets approval to operate plants beyond 40 years, ASN said in July.

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