The French government this week announced it would fully nationalize the giant, troubled, heavily nuclear utility Electricite de France. Bloomberg reported, “The climate emergency requires strong, radical decisions,” Prime Minister Elisabeth Borne said during a policy speech in parliament in Paris on Wednesday. “We need to have full control of the production and our energy future. We must ensure our sovereignty faced with the consequences of the war and the colossal challenges ahead.”
French President Emmanuel Macron during the April election promised the buy back the 16% of EDF shares the state doesn’t own. The powerful French unions CGT and FO welcomed the plan for nationalization. They had adamantly opposed privatization when the country sold off a portion of the utility in 2005. While Macron lost his parliamentary majority in the most recent election rounds, many observers say the move to buy back the EDF shares, the details of which have not yet been disclosed, is likely to be popular. But there are some conservative forces in the parliament that are likely to push back against the buy-back.
While EDF nuclear plants provide some 70% of the country’s electricity and important exports to other European countries, the company is facing serious problems with its aging fleet and its inability to manage costs in ongoing construction of new plants in France, Finland, and the UK. EDF is heavily debt burdened and its shares have been taking a beating, falling from $8.61 per share on July 15, 2021 to $4.65 on June 30, 2022 at the New York Stock Exchange.
In a related move, Reuters reported that “EDF and the French government are seeking a new boss to overhaul the power utility and build more nuclear reactors, they said on Thursday, with billions in public money earmarked to help finance a full nationalization of the debt-laden company.”
Created in 1946 by the French provisional government as part of the recovery from World War II, EDF was entirely state owned. The utility commissioned its first nuclear plant, 80-MW Chinon (long closed), in 1963. The enthusiasm for nuclear really began in 1973, facing the Arab oil embargo, eventually culminating in 56 units today.
By the 21st Century, EDF found itself in financial difficulties and in 2004 launched a partial privatization plan, which culminated in October 2005, offering the minority slice of the company on the Paris Stock Exchange. The New York Times reported, “EDF has agreed to invest $40 billion, or $48 billion, in new infrastructure over the next five years under the terms of the deal to float the company on the Paris stock market.”
–Kennedy Maize
Twitter (@kennedymaize)