The state initiates the renationalization of EDF

The electrician, in deep financial trouble, must be able to launch the new nuclear program.

Soon a new CEO and sole shareholder. After the state announced on September 30th its decision to appoint Luc Rémont as CEO of EDF, the state on Tuesday published its simplified bid for the 16% stake in the still publicly traded electrician. The operation will cost public budgets 9.7 billion euros. The repurchase price of the shares is 12 euros, a premium of 53% compared to the closing price on July 5, the day before Elisabeth Borne’s keynote speech announcing the renationalization. In the absence of recourse, the opening of the offer is planned for November 10th and will run until December 8th.

Competing Interests

A number of reasons are driving the government to regain full control of EDF. The surgery will “to facilitate the decision-making and strategic management of the company”, the state slips into its takeover bid submitted to the Financial Market Authority (AMF). Gone is the problem of balancing the executive’s energy policy goals with respect for the special interests of minority shareholders. Latest crisis so far, the group’s contribution to the financing of customs protection of more than 8 billion euros in 2022.

This decision, taken by the government in January 2022, put the board and management of EDF in an impossible position. Eventually, they forced corporate management to appeal against their ultra-majority shareholder – the state – to the Council of State for compensation. In the absence of a challenge on their part, managers risked being attacked by minority shareholders for failing to defend the company’s social interests. The executive is also reluctant to extend that decision to 2023. If he renews it, however, he has a free hand and a priori less legal risk.

SEE ALSO – EDF: Luc Rémont becomes the new CEO

Renationalization is all the more necessary as EDF is in very bad financial shape. Its debt, which topped 40 billion euros at the end of 2021, could surpass 60 billion this year. The electrician has a corrosion problem on backup circuits at the heart of around ten reactors. A tile to 29 billion euros, the group could have posted record results if its nuclear production this year had been part of the historically sharp rise in electricity prices. “The renationalization reinforces the credibility of state support for EDF given the group’s operational difficulties”we explain Bercy.

Without that ” Support “, EDF would be faced with a downgrade of its rating by the agencies. However, the group needs to maintain a high quality rating in order to be able to borrow at low interest rates to start the construction program for 6 EPR 2 ordered by Emmanuel Macron last February. However, Bercy does not want to speak of a recapitalization of the group at this point in time. On the other hand, the EUR 3 billion sale plan announced by CEO Jean-Bernard Lévy in the spring was confirmed. Unfortunately, the likelihood that this will be enough to improve EDF’s financial situation is slim.

The question of reorganizing the group also seems to come up again and again. Although the state states in its communication to the AMF that “The Hercule project, which focused in particular on the structure of EDF, is no longer relevant”, since his funeral in summer 2021. Reform of the electricity market, re-regulation of existing nuclear power, financing and regulation of the future EPR 2 fleet, etc. “However, any projects awaiting EDF must be discussed with stakeholders, including the European Commission, and may have implications for the group’s strategy or organization.”let’s say in Bercy.

SEE ALSO – EDF extends shutdown of four nuclear reactors

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