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The state is considering a new reform of EDF

A “plan B” aims to refocus the company on nuclear power and dams. A resale of EDF’s renewable activities would make it possible to finance the new EPRs. Engie dreams of preparing for his departure from the Russian gas.

The energy world is in turmoil. The withdrawal of Russian gas and the revival of nuclear energy in France are rearranging the cards of the two giants EDF and Engie. To the point that within the State, shareholder of the two companies, unprecedented reflections are taking place about their strategic future. A scenario of global overhaul of the sector is being analyzed by the Ministry of Economy, Finance and Recovery, in connection with the Elysée, which was to take place in three phases.

According to several sources close to the government, this plan is primarily based on the nationalization of EDF, which Emmanuel Macron mentioned during his presidential candidacy speech on March 17. It would then consist of a sale of EDF’s renewable energy business as part of an electrician’s refocus on nuclear and dams.

“The idea of ​​this scenario is that the funds raised will fund the construction of the six EPRs,” notes a former EDF director.

A lump of 15 billion euros

EDF’s renewable pool, in solar and wind energy, will weigh 37 gigawatts by 2024. Last year it generated 815 million euros in margins and the sale could bring in around 15 billion euros, according to bankers. The revival of a nuclear program is estimated at 50 billion euros with “huge public investment”, we are reminded of the Ministry of Economy.

According to our information, these exploratory talks have not led to a decision at this time. “But they are on the table”, a good expert on the file assures us. They are fed by the American bank Goldman Sachs, which is building various scenarios for the future of EDF on behalf of Bercy. The Ministry of Economic Affairs assures that it has “no order from the Minister on this arrangement which is not part of the discussions”.

The EDF crisis is accelerating

The representatives of the State are to resume negotiations with the European Commission on the future of EDF from May. But the company’s situation has deteriorated in recent months. Its financial results will be bad for 2022 and 2023, when it has just completed its €3 billion public bailout. The shutdown of reactors due to corrosion phenomena will probably last until next year. And the supply of electricity is being stretched, in a context where France is preparing for a gas shortage for the coming winter.

“This context forces the State to explore options that were unimaginable a few months ago,” adds a sector leader, panicked by these prospects.

The reform of the EDF will be one of the government’s priorities from June. “The regulation of nuclear prices will define the contours of the future group, specifies a source close to Bercy. And not vice versa”. After the failure of the “Hercules” plan last year, “the state is reviewing the scope and organization of EDF,” explains a player in the sector. Reflections beyond doubt for investors. Oddo analysts also believe that “the hypothesis of rapid nationalization in view of a complete reorganization of EDF is no longer taboo”.

Anticipating Engie’s difficulties

This “plan B” is also motivated by the evolution of the gas situation. France wants to cut Russian gas imports by two-thirds by the end of the year and abandon them by 2027. A target that will weigh heavily on the profile of Engie, whose margins still depend on half of the gas. Not to mention the impact of the expansion of two of its seven nuclear reactors in Belgium.

The sale of EDF’s sustainable activities could benefit the gas giant. And Engie dreams of it: “If they were for sale, we would of course be very interested,” assures a source close to the group. The company has just completed a refocus on gas and renewable energy after selling its water business with Suez and its services business with Equans. Thanks to these divestments, Engie has a cash war chest of 10 billion euros to invest in renewable energy sources. An amount that would be very useful for EDF…

Engie also has the state as the largest shareholder (24%) which could thus orchestrate itself the reorganization of the energy sector in France around EDF and Engie. “Emmanuel Macron has always wanted to reconstitute the sector,” assures a regular visitor to the Elysée. He already had that wish when he was Minister of Economic Affairs. A takeover of EDF’s renewable arm by Engie “would solve EDF’s strategic problem and Engie’s at the same time”, concludes a close expert of the two groups. It reflects the mysterious phrase of Emmanuel Macron a month ago: “We will have to regain capitalist control over several industrial players”. With EDF and Engie, the state would have two “armed weapons” in nuclear and renewable energy.

Matthew Pechberty Journalist BFM Business

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