“Significant progress has been made in our discussions with the European Commission, but to date we have not reached a comprehensive agreement,” said a government official. “Therefore, it is not possible to submit a bill to parliament if the main points of reform have not been agreed in advance. “
Jean-Bernard Lévy, chief executive of EDF, on Thursday refused to provide a precise timetable for the completion of the reform, but analysts said it would likely prove difficult at least until after the French presidential elections in next april.
“I regret that this essential reform for EDF cannot take place now”, declared Lévy. “Our short term [prospects] are guaranteed, but our medium and long term are not guaranteed if we want to play in the big leagues, which is expected of EDF.
Called Project Hercules, EDF’s overhaul project was to give it the financial firepower to invest in both nuclear and renewable energies in the decades to come.
An important element would be to change the mechanism and the regulated tariffs to which EDF sells nuclear power, which supplies 70% of French electricity. France wanted to pass higher regulated tariffs for nuclear energy, so that EDF could repay heavy debts and absorb the high maintenance costs of its nuclear reactors.
But Brussels is expected to approve such a change because of its mission to ensure free competition in the energy sector and prevent member states from unfairly bailing out companies.
The plan would effectively split EDF by creating a state-owned parent company, EDF Bleu, containing the nuclear assets as well as a hydroelectric subsidiary. Another subsidiary, EDF Vert, would house renewable assets, network and service activities, and would be listed on the stock exchange with around a third sold to raise funds to stimulate EDF’s investments in green energy.
Macron argued that the changes are essential for EDF to thrive and keep up with its rivals. Since France owns nearly 84 percent of the group, the government had also hoped that the reforms would ease the financial burden on the state.
But the overhaul was caught in feuds with the commission. Le Monde reported that the main sticking point was how the relationships between the newly created entities would work and whether liquidity could flow freely between them as if the business was still fully integrated.
France’s finance ministry, which spearheaded the talks, and the Elysee Palace declined to comment further on the details.
The powerful unions of EDF had opposed the project as a prelude to the dissolution or privatization of the group, and also expressed fear that it paves the way for the marginalization of nuclear energy.
“We celebrate the coup de grace delivered to Hercules,” said the far-left union CGT. “The sole purpose of these maneuvers is to achieve juicy financial transactions to the detriment of consumers and EDF employees. “
EDF shares fell as much as 4% on Thursday, the reform failure eclipsing the good second-quarter financial results which showed the utility rebounded as economic activity picked up despite the Covid-19 pandemic.
Barclays analysts wrote in a note that investors were too pessimistic about the prospects for reform even though its timing was difficult to predict.
“We continue to believe that there will eventually be an agreement between the EU and France on the reorganization of EDF. “
Additional reporting by David Keohane