The value of the day in Paris – EDF rises, nationalization scenario takes shape – 06/09/2022 at 11:56

(AOF) – EDF gains 2.8% to 8.33 euros. In an article published this morning titled “EDF: the contours of the coming revolution”, Les Echos reveals that the electrician’s nationalization project is one of the priority projects of the new government. Jean-Bernard Lévy, the CEO of the public group, has made an appointment with EDF’s various trade union organizations to discuss the topic, the newspaper reports.

“For the government, the 100% public alternative offers many advantages”, deciphers Les Echos.

“Politics First: Initiating nationalization makes it possible to cast a more favorable light on the highly controversial reform of EDF – as both the left and the right believe that nuclear power should be sanctified in the hands of the state.”

It is also an essential symbol for the EDF unions. “Nationalization would mean a return to basics, to the group founded by Marcel Paul,” said a source close to the public authorities quoted by the daily.

In this operation, which is mainly aimed at the executive, it is EDF’s exit from the stock market, Les Echos assures.

“The objectives of this operation, which could be combined with a capital increase, are multiple: to reassure investors, to reduce financing costs, to benefit from a more favorable negotiating position with Brussels on the reform of the regulated price of nuclear energy (Arenh) or even the new EPDs finance,” the newspaper writes.

“For the government, removing minority shareholders from EDF’s capital would also give it a free hand to decide on new measures – potentially very unfavorable for EDF – designed to contain rising prices,” said Les Echos.

At this stage, the newspaper understands, “two options are being studied: either via a simplified public offer for minority shareholders, or via a nationalization law. The first option seems cheaper and faster, but n does not offer the same political echo …”.

AOF – MORE INFORMATION

Most important points:

– World leader in low-carbon energy, founded in 1946 with 38.5 million customers worldwide and 117.3 GW of installed capacity: 60% in nuclear, 18% in hydraulics, 8% in renewable energy, 9% in gas, 3% in heating oil and 2% in coal;

– Turnover of EUR 84.5 billion and installed capacity of 117.3 GW: 60% in nuclear energy, 18% in hydraulics, 8% in renewable energy, 9% in gas, 3% in fuel oil and 2% in coal;

– “Cap 30” business model with 3 strategic axes: supporting customers towards CO2 neutrality through 10 billion turnover in services, the ranking of the 1st world producer of net CO2 electricity and the role of actor of the energy transition;

– 83.88% state-owned capital, with Jean-Bernard Lévy as CEO of the 18-member board of directors;

– Balance sheet cleaned up in April with net debt (rated A due to the state guarantee) of €42.3 billion, which will be boosted between 2022 and 2024 by the €3 billion sale plan.

Challenges

– 4 strategic plans: electric mobility – 30% market share in the supply of electricity to electric vehicles by 2023 in France, the United Kingdom, Italy and Belgium-, storage -10 GW installed worldwide by 2035-, solar energy – 30% of the market in France in 2035 and the Excell plan for the French nuclear sector;

– Innovation strategy focused on digital transformation, manufacturing processes, future electrical systems and decarbonisation of customer use: R&D budget of €661 million with 756 patented innovations, EDF Pulse Croissance funds and incubator and research partnerships (Sinclair laboratory, 5g living lab, quantum computing, etc.);

– Environmental strategy incorporated into the group’s raison d’être: carbon neutrality by 2050 and 50% reduction, vs. 2017 of emissions in 2030, 99% of the operational budgets devoted to decarbonisation and energy transition, €8.755 billion in “green and sustainable” financing and 72% of the credit lines indexed on ESG indicators;

– Launch of the construction program for 6 EPR2s and studies for 8 others;

– Maintaining high wholesale prices that partially offset the state’s constraint on retail price increases on corporate profits;

– Integrated operator, from the design and manufacture of nuclear reactors through Framatome, 75% owned, in addition to Mitsubishi (19.5%) to distribution.

Challenges

– Activity covered by the NOME law (free competition between all market players and resale of a quarter of EDF’s nuclear electricity production to its competitors) and electricity prices managed in France, thus a maintenance cost network that is little included in the tariffs;

– Solving the corrosion problems affecting the reactors, which have closed almost half of the production capacities;

– Impact of the conflict between Russia and Ukraine: commodities volatility, supply tensions;

– Neutralization of the competitive advantage of nuclear energy through the obligation to sell electricity at market price to industrialists and closure or maintenance of nuclear power plants, penalizing production in 2022;

– Speculation about delisting by the State;

– 2023 target of a debt leverage of less than 3.

High-stakes waste management

In France 350 million tons of waste are produced every year. If 66% is recycled, the rates vary according to the nature of the waste. That is only 21% of the plastics. In order to strengthen the circular economy, the government is providing massive support for R&D in the context of the 3R strategy (Recyclability, Recycling and Reincorporation of materials). An envelope of 370 million euros is being spent on it. In terms of hazardous waste, this activity is very profitable. In France, storage and processing capacities have been stretched compared to annual needs.

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