The French government is breaking down the idea the private sector always does it better by fully nationalising its giant electricity utility, EDF. The French government said the step is needed to manage the transition away from fossil fuels at a time of an energy crisis and the war in Ukraine.
Prime Minister Élisabeth Borne, addressing the National Assembly for the first time since President Emmanuel Macron appointed her to the role, said the government intended to hold 100% of EDF’s shares, compared with the 84% it owns currently.
It was only February of this year that the French government decided to inject €2.1 billion into EDF as part of a €2.5 billion rights issue designed to shore up its capital in the face of the surge in energy costs across Europe in late 2021 and early 2022 (and before the burst from the Russian invasion of Ukraine).
The government justified paying its share of the fundraising as easing the financial pain inflicted by nuclear reactors going offline and the state making the firm supply power below market prices.
“We must have full control over our electricity production and performance,” Borne said in her first state-of-the-nation speech to Parliament on Wednesday, as she tried to court opposition parties to avoid parliamentary deadlock.
“We must ensure our sovereignty in the face of the consequences of the war and the colossal challenges to come … That’s why I confirm to you the state’s intention to own 100% of EDF’s capital.”
The option of fully nationalising EDF was flagged by Macron earlier this year as he intends to make the company the main pillar of a massive investment in new nuclear reactors.
EDF is one of the world’s biggest electricity producers, but the company is facing delays and budget overruns on new nuclear plants in France and Britain, and corrosion problems at some of its ageing reactors, which have undermined its share price.
Half of its nuclear reactors in France are currently offline. EDF has also been hurt by government rules forcing it to sell power to rivals at a discount while prices hit record highs.
The company has estimated that output losses will reduce profits by €18.5 billion ($A27.6 billion) and the discounted power sales will cost it €10.2 billion.
Its debt is expected to rise 40% this year to more than €61 billion.
The French government partially denationalised EDF in 2005 by selling shares to raise around €5 billion. The sale price was €83.10.
Wednesday saw EDF shares close up more than 14% on news of the nationalisation at €8.98, a fraction of that sale price 17 years ago. EDF has 576 million shares on issue to non-government shareholders. Nationalising the company would cost around €4.5 to €5 billion at most.
