Spain debt

France will nationalize EDF, in debt, while the energy crisis…

“The climate emergency requires strong and radical decisions. We must have full control of production and our energy future. We must ensure our sovereignty in the face of the consequences of the war and the colossal challenges ahead,” Prime Minister Elisabeth Borne said during her orientation speech to Parliament in Paris on Wednesday. “This is why I confirm today the intention of the State to hold 100% of the capital of EDF.”

Borne gave no details on the nationalization of EDF, 84% owned by the state. President Emmanuel Macron had said during his re-election campaign in March that part of the company should be nationalized to bolster France’s energy independence and its net-zero ambition by building new atomic power plants.

EDF shares jumped on Borne’s announcement, climbing as much as 10% in Paris after falling sharply ahead of his comments.

EDF has been struggling for several years with various problems related to its aging fleet of reactors and cost overruns during the construction of new reactors. Its problems are exacerbated by a government price cap and Russia’s invasion of Ukraine, which is driving up the price at which the company must buy back its power generation deficit.

The plan signals that European governments may be increasingly pressured to protect their energy companies from the troubles caused by the war in Russia. Nationalizing EDF would be a largely consensual move in French politics, which is expected to see a divided lower house rally around Macron who lost his absolute majority in elections last month.

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Macron said earlier this year that EDF will need a massive reorganization and tens of billions of euros in public funding to help it to build 6 to 14 new nuclear power plants by 2050. The new plants, along with many new wind and solar projects and very ambitious energy saving targets, are part of the French plan for carbon neutrality by 2050 .

A nationalization of EDF could reassure creditors because the net financial debt of the public service, which amounted to 43 billion euros at the end of last year, should soar despite a capital increase of 3.2 billion euros in April.

Ratings firms, which downgraded the utility in February, have warned of potential further cuts as the company grapples with repairs at some of its nuclear plants and cost overruns at nuclear plants under construction in France and the United States. UK.

In 2019, the French government was considering to buy minority shareholders as part of a restructuring to help finance the life extension of EDF’s aging nuclear power plants – which produced 69% of the country’s electricity last year – and invest more in energies renewable.

The plan stalled in 2021 after more than a year of talks as the European Commission – which is reviewing proposals that could be considered “state aid” to a company – called for a deeper separation of the different EDF entities in exchange for higher regulated tariffs for its nuclear energy. .

Macron has asked the Commission to consider an overhaul of Europe’s electricity market to make it less dependent on soaring gas prices, as the EU’s executive arm has yet to find solutions. Meanwhile, Spain and Portugal have been given the green light to temporarily cap prices.

“France must also be prepared for all scenarios concerning Russia’s gas supply, even the most difficult,” Borne said. “We can hold on, but everyone will have to act.” The government will increase home renovation grants to cover 700,000 households a year, she said.