The French government and its chief executive, whom it chose to lead the state-owned nuclear group EDF, have been at odds over strategy and funding as the country prepares for the largest reactor construction program in decades.
People close to the talks said that the state, which recently renationalised EDF is at odds over some of Luc Remont’s plans to try and make the group more profit after his appointment a full year ago.
One person who was familiar with the discussions said, “It is pretty tense.”
The people said that a planned overhaul of nuclear energyprices in France, which is expected to take place soon, has caused rifts. EDF wants higher prices in order to raise much-needed funds, but the government wants to keep the cost of energy as low as possible for both households and businesses.
Another person stated that “the government must have reasonable prices for consumers and that electricity prices are high enough to allow Remont to invest.”
The debate surrounding EDF has an existential core — whether or not its executives should be able to run the company as a normal business despite the fact that it is state-owned. EDF has net debt of close to €65bn. The group’s finances have improved and it returned to profit in the first half of 2023, but Rémont has outlined annual spending needs of €25bn per year, higher than the €16bn-€17bn it used to budget for, and which he does not want to finance with more loans.
Remont, former civil servant at Schneider Electric and executive, said in July that EDF “still functions as a company” and must be able to do so.
One banker in Paris commented on the tensions between EDF and the government: “If it doesn’t work for Remont, it won’t with anyone else.” There’s been a long-standing fiction that a state-owned company is not the state.
The clashes highlighted France’s struggle to overcome the internal fighting that plagued the former monopoly for so long, despite government’s decision to take 100% control and appoint Remont to lead this new phase.
The power price talks are intended to replace Arenh (which expires in 2025), a system where EDF sold a portion of its production at a fixed price of €42/megawatt-hour to industrial groups and third party distributors. French wholesale electricity costs are still above €100 per megawatt-hour.
Brussels will have to give the go-ahead to any mechanism that replaces the Arenh, as the EU also tries to reach an agreement on wider reforms of the electricity market. They have been slowed down by disagreements between France, Germany and the EU over whether nuclear power can be eligible for subsidies.
EDF, which was previously owned by the government to an extent of 84 percent, has been plagued for years with state interventions that executives believed were detrimental to the group. The situation reached a climax during the energy crisis of 2022, when EDF had to pay for the caps on electricity prices for consumers. This contributed to the record €17,9bn loss that year. However, the group was also criticised for its own failures following outages in its nuclear reactors.
Remont’s appointment marked a shift to a more cohesive structure of full-government ownership so that EDF can deliver on its biggest challenge: the construction at least six nuclear reactors in France. This €52bn program is the backbone of the country’s strategy to reduce carbon emissions. The company also has other major nuclear projects, including those in Britain.
People familiar with the situation said that Remont will not be able to deliver the strategy plan in its entirety in the near future. He was expected to do so by the summer.
People said that instead of implementing the plan, he was testing the waters with a few proposals. One included a market-based vision on how EDF can restore its margins, which is in conflict with the state’s plan to set and regulate nuclear power prices.
There are also tenders for power contracts of 10 or 15 years, which were launched in this month. These contracts will be offered to third-party electricity suppliers such as TotalEnergies or Engie that sell EDF production. This is a long-term contract format which was not available before.
The French government did not agree with Remont’s proposal because it considered them unrealistic and unworkable. They may not be accepted by Brussels regulators who are examining whether EDF is complying with the rules on state aid and competition.
Officials played down tensions between EDF and the official, but said that both sides were looking for a solution.
The person stated, “Our interests align now that the government owns 100% of the company.” “If EDF makes a loss, we also lose money.”
The EDF has acknowledged the differences between Remont and the state, but also downplayed the tensions by noting that the exchanges were not aggressive.
EDF and Energy Ministry declined to comment.
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