EDF Approves Share Sale Before Board Decision on Hinkley Pointby
Sale of $4.4 billion of stock to help EDF ride slump in prices
Board votes July 28 on U.K. nuclear project as unions object
Electricite de France SA approved plans for a 4 billion-euro ($4.4 billion) share sale, two days before its board meets to make a final investment decision on its controversial British nuclear-power plant project.
“The share sale will improve the financial strength of the company and allow it to renew its debt under good conditions,” EDF Chief Executive Officer Jean-Bernard Levy said Tuesday at a shareholder meeting in Paris. “Provided the board allows the company to go for the final investment decision,” we will sign with the new U.K. government, he said, without giving a time-frame.
EDF’s board meets on July 28 to vote on the 18 billion-pound ($23.6 billion) project to build two atomic reactors with a Chinese partner at Hinkley Point in southwest England. The decision may hinge on the votes of independent board members as three of the French company’s main labor unions call for the development to be delayed to reduce financial pressure and construction risks.
EDF Chief Financial Officer Thomas Piquemal resigned in March, saying Hinkley Point would put too much strain on the utility, while rating companies have said a decision to proceed might trigger a credit downgrade. EDF plans to sell 10 billion euros of assets by 2020 to help fund the project, which will generate an annual rate of return of 9 percent if built on time and budget.
The Hinkley Point C power station, which is due to generate about 7 percent of the U.K.’s power demand and to replace aging plants, depends on a subsidy agreed with the British government. That would result in EDF being paid 92.50 pounds for every megawatt-hour of electricity it produces for 35 years, more than twice the current price.
Should EDF’s board decide to proceed, the utility will need the new U.K. government to ratify the contract-for-difference previously approved by former Prime Minister David Cameron, who resigned after failing to convince British voters to stay in the European Union.
A vote to move forward would represent a strong financial commitment to the U.K. a month after the Brexit vote. The U.K. government has said Hinkley Point will help reduce greenhouse gas emissions as it closes all coal-fired generation by 2025.
EDF, which has already spent 2.5 billion pounds on Hinkley Point, needs the project to maintain its know-how and prepare for the retirement and renewal of its aging French and British nuclear fleet, Levy has said. China General Nuclear Power Corp., which will fund a third of the project, must also ratify the accord.
EDF’s main labor unions are seeking a court decision to void the board’s impending decision as they want the project to be delayed by about three years to give the company time to complete the construction of similar reactors in France and China, which are several years behind schedule.
The French government, which owns 85 percent of EDF, has said it will subscribe to 3 billion euros of the planned capital increase. The power company will sell the stock by early next year to help ride out a slump in European power prices.