France suspends EDF reform – POLITICO – .

France suspends EDF reform – POLITICO – .

French President Emmanuel Macron withdrew on Thursday from a proposal to split and privatize the majority public utility Electricité de France (EDF), which could have hampered his candidacy for a second term next year.

Paris is engaged in tense 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 a proposal for EDF reform to lawmakers this fall, a government official confirmed to POLITICO. This means that any major reorganization is off the agenda until after the presidential vote in April.

“Substantial progress has been made in our discussions with the [European] Commission, but to date we have not reached a comprehensive agreement – and it is not possible to submit a bill to Parliament if the basic principles are not agreed beforehand [with Brussels] The official said.

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

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

Thursday’s decision is a sign of the political weight of EDF, created in 1946 to bring together hundreds of operators and completely rebuild the country’s transport network by the war hero and then head of the French provisional government, General Charles de Gaulle.

With the oil shock of 1973, EDF’s pivot towards the construction of nuclear power stations became a symbol of French independence which still resonates in public opinion today.

“Beyond energy issues, the question of EDF is also a question of emotional attachment for many French people,” said Thomas Pellerin-Carlin, director of the energy division of the Jacques Delors Institute. “Carrying out such a reform nine months before the presidential election 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An outdated model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 – includes France’s nuclear power generation fleet, hydroelectric dams, gas and coal power plants, power grids and a handful of wind farms. and solar. It also sells electricity directly to consumers and trades in international wholesale markets.

But a series of EU-mandated measures aimed at opening up the country’s energy markets have started to attack the French giant.

EDF has been under threat of EU competition proceedings since 2011, when several contracts to operate public hydroelectric dams expired and were to be opened to private bids under the block’s liberalization rules. About twenty of these contracts are in progress, according to the Minister of Ecological Transition Barbara Pompili.

Since 2010, the EU has also asked EDF to make part of the nuclear electricity it produces available to its competitors at a fixed price of € 42 per megawatt hour – a measure intended to help alternative electricity providers to thrive. The requirement has been decried at the national level for having contributed to the group’s debt of 41 billion euros.

France’s 56 aging nuclear reactors, which provide 70% of the country’s electricity, will need billions more to be maintained in the years to come.

Macron’s plan to reform EDF – initially dubbed Project Hercules in 2019, then renamed Grand EDF in May in the face of intense union opposition – would divide the group to ease competition concerns in Brussels and give the company a financial lifeline. with a higher negotiated level. price of nuclear energy that it has to sell.

The reorganization project would separate the group into EDF Blue, a public entity dedicated to nuclear power; EDF Green, a listed company bringing together the production of renewable energies and electricity networks; and EDF Azure, dedicated to hydroelectric activities.

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

EDF CEO Lévy has repeatedly expressed his hope that EDF can remain a unified group, so employees can switch from fossil fuels to clean energies and profits from faster growing renewable sectors can help finance the modernization of the nuclear fleet.

The Minister of the Economy Bruno Le Maire and Pompil has also stressed on several occasions that EDF must remain an integrated group.

But Brussels wants to be sure that any state aid paid into nuclear power is separated from the parts of the business subject to competition, such as the development of renewable energies.

Political danger

In February, Le Maire complained to the National Assembly that EDF’s nuclear debts had hampered its ability to deploy wind and solar more quickly, which led Spain’s Iberdrola and Italy’s Enel to overtake EDF on the stock market.

” What does it mean? Investors believe that EDF does not have enough leeway to invest in renewable energies at the level it should, ”he said.

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

The secrecy surrounding the negotiations between Paris and Brussels has also been a sensitive point for French MPs, who want a national debate on EDF and the drafting of a negotiating guide that the Macron government should follow in discussions with the EU.

French lawmakers have even discussed two resolutions aimed at potentially protecting EDF from EU state aid rules, currently under consideration by the National Assembly’s economic committee.

The first, sponsored by a member of the majority Macron party, La République en Marche, proposes to qualify energy production in France as a “service of general economic interest”. Another more radical proposal comes from the Communist Party, which would like to exempt the energy sector entirely from EU rules on state aid and public concessions.

“I hope that after the presidential and legislative elections, we will be able to have a real debate on France’s strategy to become climate neutral by 2050, then a debate on the role of EDF and its thousands of employees in this great 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 electricity they produce; it’s 41 billion euros, there are 56 reactorss, and they produce 70 percent of French electricity.

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