French Economy Minister Pledges Support for EDF, Hinkley Point Project

  • Hinkley Point in U.K. remains ``great'' project for utility
  • Macron to meet with EDF chief Jean-Bernard Levy on Friday

Electricite de France SA, the indebted nuclear-power producer considering an 18 billion-pound ($26 billion) reactor project in the U.K., can count on fresh financing from the French state if needed, Economy Minister Emmanuel Macron said.

The Hinkley Point project in southwest England would be “great” for EDF and dropping plans would be a mistake, Macron said Thursday at the Civaux nuclear station in western France. Measures to support the company will be announced by early May, he said, adding that the utility must also make efforts to reduce costs.

EDF’s finances are coming under strain as falling power prices and rising competition threaten future earnings while it needs to spend 50 billion euros ($57 billion) by 2025 to renovate its fleet of French reactors. Chief Financial Officer Thomas Piquemal resigned this month after his plea to delay Hinkley Point was rejected. The French government owns 85 percent of EDF.

The company’s net financial debt climbed to 37.4 billion euros at the end of 2015 from 34.2 billion euros a year earlier. EDF has said it will finance new developments with asset sales and slash operational expenditures by 700 million euros by 2018.

The utility’s shares fell as much as 4.4 percent in Paris trading, and were up 0.4 percent at 9.74 euros as of 4:51 p.m. local time. The stock has slumped 28 percent this year.

Scrip Payout

French Finance Minister Michel Sapin said last month that the state would be willing to accept its EDF dividend in shares to allow the company to invest more cash, a position reiterated by Macron on Thursday.

“I don’t rule out any form of support,” he said. “If there’s a need for a recapitalization, we’ll do it. If we must again give up the dividend, we’ll do it.”

Challenges Magazine reported this week that the government may waive its right to a cash dividend from EDF for the next five years to shore up the balance sheet by about 12 billion euros. Chief Executive Officer Jean-Bernard Levy said Thursday that he didn’t “come to the same conclusion.”

U.K. Q&A

Macron is due to meet Levy Friday evening, a government schedule shows, as the CEO prepares to make a final investment decision on whether to build two new reactors at Hinkley Point. The company’s U.K. chief, Vincent de Rivaz, will also be questioned by British lawmakers on March 23, Parliament’s Energy and Climate Change Committee said Thursday.

“Serious questions are being raised about the cost and viability of the Hinkley project and the value for money for taxpayers,” committee Chairman Angus MacNeil said in a statement.

EDF has repeatedly delayed taking a decision on Hinkley Point. That’s in spite of forming a partnership with China General Nuclear Power Corp. and securing guaranteed power prices at about twice the current market rate for 35 years, as well as a government loan guarantee of 2 billion pounds for construction.

If electricity prices hadn’t fallen so much since October, the company would have already made a decision on the project, Levy said Thursday at the Civaux plant.

CFO Exits

Piquemal quit in early March after expressing concern that a final decision on Hinkley Point could be announced as early as April, a move he warned might jeopardize EDF’s financial situation, people with knowledge of the matter said at the time.

Macron described Piquemal’s departure as a “personal choice” and said the former CFO had backed the reactor project under previous CEO Henri Proglio.

Macron also reiterated that EDF will pursue asset sales, and that its wholly owned power-grid operator RTE could be opened up to public and private partners as a “lever” to help the company.

“We must keep looking at what we can bring the company regarding regulation,
regarding a carbon price, the capacity regulation and measures that can revive
power prices that are currently too low,” the minister told journalists before leaving the power station.

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