France puts EDF reform on hold

Dismantling the group would have been 'political suicide' for President Macron ahead of elections.

France puts EDF reform on hold

French President Emmanuel Macron on Thursday backed away from a proposal to split up and further privatize majority state-owned utility Électricité de France (EDF) — something that could have hampered his bid to win a second term in office next year.

Paris is engaged in fraught negotiations with EU competition authorities over the future of the debt-ridden energy giant, which has opened Macron to political attacks.

He will no longer present lawmakers this fall with a proposal to reform EDF, a government official confirmed to POLITICO. That means any major reorganization is off the agenda until after April’s presidential vote.

“Substantial progress has been made in our discussions with the [European] Commission, but to date we haven’t concluded an overall deal — and it is not possible to submit a draft law to parliament if the overarching principles aren’t the subject of a prior agreement [with Brussels],” the official said.

The European Commission on Thursday confirmed that “contacts with the French authorities on the reform of the regulated access to nuclear energy and on the hydropower concessions” were “an ongoing discussion.” It declined to comment further.

EDF CEO Jean-Bernard Lévy, who is not a party to negotiations between EU competition officials and the French government, on Thursday said: “We regret that this reform, which is indispensable for the company, cannot be carried out now … EDF needs a reform to be able to fully play its role in the energy transition.”

Thursday’s decision is a sign of the political heft of EDF, created in 1946 to consolidate hundreds of operators and entirely rebuild the country’s transmission grid by war hero and then-leader of France’s provisional government General Charles de Gaulle.

When the 1973 oil crisis hit, EDF’s pivot to building nuclear power stations became a symbol of French independence that still resonates among the public today.

“Beyond the energy stakes, the question of EDF is also one of emotional attachment for many French citizens,” said Thomas Pellerin-Carlin, the director of the Jacques Delors Institute’s energy center. “Making such a reform nine months before the presidential elections would have been political suicide for Emmanuel Macron, who would then have offered his opponents, Jean-Luc Mélenchon and Marine Le Pen in particular, a golden subject.”

An outdated model

Today, vertically integrated EDF — which was partially privatized in 2004 — comprises France’s electricity-generating nuclear fleet, hydroelectric dams, gas- and coal-fired plants, power grids and a smattering of wind and solar farms. It also retails electricity directly to consumers and trades on the international wholesale markets.

But a series of EU-mandated measures aimed at opening up the country’s energy markets has begun hacking away at the French giant.

EDF has been under threat of EU competition proceedings since 2011, when several publicly held hydroelectric dam operating contracts expired and were required to be opened to private bids under the bloc’s liberalization rules. About 20 such contracts are outstanding, according to Ecological Transition Minister Barbara Pompili. 

Since 2010, the EU has also required EDF to make a portion of the nuclear electricity it produces available for its competitors to purchase at a fixed price of €42 per megawatt-hour — a measure meant to help alternative power providers flourish. The requirement has been decried domestically for contributing to the group’s €41 billion debt load.

France’s 56 aging nuclear reactors, which provide 70 percent of the country’s power, will require billions more to maintain in coming years.

Macron’s plan to reform EDF — initially dubbed Project Hercules in 2019, then rebaptized Grand EDF this May in the face of intense union opposition — would split up the group to allay competition concerns in Brussels, and throw the company a financial lifeline with a higher negotiated price for the nuclear power it’s required to sell.

The proposed reorganization would separate the group into EDF Blue, a publicly-controlled entity dedicated to nuclear power; EDF Green, a listed company comprising renewable energy production and power grids; and EDF Azure, dedicated to hydroelectric activities.

French lawmakers and unions have criticized the plan as a dismantlement that would nationalize the nuclear debt but privatize the profitable grid and green sectors.

EDF CEO Lévy has repeatedly stated his hope that EDF can remain a unified group, so that employees can switch from fossil fuel to clean energy jobs and so that profits from faster-growing renewable sectors might help finance nuclear fleet upgrades.

Both Economy Minister Bruno Le Maire and Pompili also repeatedly stressed that EDF should remain an integrated group.

But Brussels wants assurances that any state aid poured into nuclear is kept separate from the parts of the business subject to competition, like renewable energy development.

Political danger

In February, Le Maire complained to the National Assembly that EDF’s nuclear debts had hampered its ability to roll out wind and solar more quickly — leading to Spain’s Iberdrola and Italy’s Enel overtaking EDF on the stock market.

“What does this mean? Investors feel that EDF doesn’t have sufficient room to maneuver to invest in renewables at the level it should,” he said. 

Lévy and pro-nuclear lawmakers counter that if France were to secure the inclusion of nuclear in the EU’s list of sustainable investments, called the taxonomy, it would drive private capital into EDF and command a premium for CO2-free nuclear electricity on energy markets.

The secrecy surrounding negotiations between Paris and Brussels has also been a sore point for members of the French parliament, who want a national debate on EDF and the drafting of a negotiating guide that Macron’s government would have to follow in talks with the EU.

French lawmakers have even discussed two resolutions to potentially shield EDF from EU state aid rules, currently being considered by the National Assembly’s economic committee.

The first one, sponsored by a lawmaker from Macron’s majority La République En Marche party, proposes to label energy production in France as a “service of general economic interest.” Another more radical proposal comes from the Communist Party, which would like to totally exempt the energy sector from EU state aid and public concession rules.

“I hope that after the presidential and legislative elections, we can have a real debate on France’s strategy to become climate neutral by 2050, and then a debate on the role of EDF and its thousands of employees in this grand transformation,” said Pellerin-Carlin of the Delors Institute.

Louise Guillot contributed reporting

CORRECTION: This article has been updated to correct EDF’s debt, the number of reactors in the company’s French nuclear fleet, and the percentage of power they generate; it is €41 billion, there are 56 reactors, and they generate 70 percent of French electricity.

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Almost half of Brits think Boris Johnson eased coronavirus rules too soon: poll

Forty-six percent of British voters said they thought restrictions were lifted too early in an exclusive POLITICO poll.

Almost half of Brits think Boris Johnson eased coronavirus rules too soon: poll

Boris Johnson is determined to press ahead and lift coronavirus restrictions — but British voters aren’t so sure.

The U.K. government has come under fire from some scientists for ditching social distancing rules and mask mandates while COVID cases continued to soar on July 19. Initially billed as “freedom day” by elements of the media and some politicians, Johnson eventually struck a more cautious tone as he asked Brits not to treat the easing like a “great jubilee.”

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The figure on masks will be of some comfort to government scientists, who continue to stress their importance despite mixed messages from ministers.

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One of his ministers, the Communities Secretary Robert Jenrick, said on July 4 he would stop wearing a mask when they were no longer legally required. When the government later released advice that said Brits are “expected and recommended” to keep wearing masks after a sharp rise in cases, Jenrick told the BBC he had said nothing of the sort.

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