French Prime Minister Elisabeth Borne said on Wednesday that the country plans to fully nationalize power utility Electricite de France (EDF) in an attempt to give the government more control over a restructuring of the debt-laden group to combat the energy crisis in the region.
The power utility, of which the state already owns 84%, is one of Europe's largest utilities and sits at the heart of France's nuclear strategy. The government is banking on this to blunt the impact of soaring energy prices exacerbated by the prospect of an abrupt halt to Russian gas imports.
Nationalization of France's EDF
However, instead of being an ace in the French government's hands, it has become a major liability due to years of delays on new nuclear plants in France and Britain, with budget overruns in the billions of euros.
In her policy speech in the lower house of parliament, Borne said that she was confirming that the state intends to control 100% of EDF's capital. "We need to ensure our sovereignty in the face of the war (in Ukraine) and the looming colossal challenges," she added, as per Reuters.
With current market prices, buying out the stake that the government does not already own would cost roughly $5.09 billion. This year, EDF has faced a litany of problems, including half of its aging reactors in France, currently offline, partly due to corrosion problems, forcing it to cut nuclear output repeatedly at a time when the region is struggling to find alternatives to Russia's gas supply.
Furthermore, EDF has also been hurt by government moves that forced it to sell power to rivals at a discount as part of efforts to shield French consumers from a sharp increase in their cost of living. It became a big part of the power utility's struggles because the group sells forward its estimated nuclear output before the end of the budget year.
According to US News, company officials said that output losses will reduce the power utility's core profit this year by $18.8 billion and the discounted power sales will cost it a further $10.4 billion. The company's debt is projected to rise by 40% this year to more than $62 billion as planned new-generation nuclear reactors will require investments of more than $51 billion.
Growing Energy Crisis
President Emmanuel Macron flagged the option of fully nationalizing EDF earlier this year, but the picture has since become more complicated as he lost his absolute majority in parliament. The leader has already been forced to scrap an overhaul of EDF last year in the face of opposition from unions and doubts voiced by the European Commission.
The tossed-out plan envisaged placing EDF's profitable renewables business in a new company unburdened by the debt-laden nuclear assets. However, Borne did not specify if the nationalization would be carried out via special legislation or through a public tender to buy out minority shareholders.
Macron is now insistent that the government should champion economic and energy sovereignty to bolster the country's independence and meet climate goals, including regaining control of key national industries, the New York Times reported.
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