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France says ready to pump money into EDF if needed

The French government stands ready to inject fresh capital into energy giant EDF if necessary, Economy Minister Emmanuel Macron said.

France says ready to pump money into EDF if needed
Photo: AFP

“If there is a need to recapitalize, we will do so,” Macron said during a visit at the Civaux nuclear station in central France.

“If we need to forego dividends again, we will do so,” he added.

EDF, 84-percent owned by the French state, has reportedly asked the government to help it finance a contested plan to build a next-generation power plant in Britain.

French leaders have publicly thrown their support behind the £18-billion ($26 billion, €23 billion) project at Hinkley Point in southwest England despite the growing concern over its price tag, which reportedly prompted EDF's finance chief to quit.

Funding that scheme comes on top of EDF's existing debt pile of more than €37 billion as it seeks to overhaul its French nuclear plants as well as finance the takeover of the reactor arm of struggling nuclear giant Areva.

Last month, the government accepted dividend payments in shares rather than cash, saving EDF some €1.8 billion ($2.0 billion).

“We will all make an effort. The government as shareholder has started doing so,” Macron said, acknowledging that the government had been “too short-termist” in its dealings with EDF in recent years.

But a source close to negotiations between EDF and the government told AFP that the utility's chairman, Jean-Bernard Levy, is also pushing the state to accept a capital increase to cover Hinkley Point expenses. “That is the only solution to finance this kind of project,” the source said.

Such a cash call would have to be for at least five billion euros, said Alphavalue analyst Juan Camilo Rodriguez, enough to cover EDF's cash flow needs for the next three years.

But that would still leave a question mark over EDF's longer-term future in the face of falling electricity prices and losses in income from France opening up its energy markets to competition, analysts said.

As the French government is strapped for cash, it will lean towards solutions that don't involve handing out money, like converting dividends into stock for several years to come, analysts said.

Another such option would be the partial sale of EDF unit RTE, which manages energy transmission. Analysts at brokers Natixis said recently that the sale of 25 percent in RTE would net EDF around €3.5 billion.

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ENVIRONMENT

France begins shutting down oldest nuclear plant

French state-owned energy giant EDF on Saturday began shutting down the country's oldest nuclear power plant after 43 years in operation.

France begins shutting down oldest nuclear plant
Photo: SEBASTIEN BOZON / AFP

EDF said it had disconnected one of two reactors at Fessenheim, along the Rhine near France's eastern border with Germany and Switzerland, at 2:00 am (0100 GMT) in the first stage of the complete closure of the plant.

The second reactor is to be taken off line on June 30 but it will be several months before the two have cooled enough and the used fuel can start to be removed.

French nuclear power plant is seven years late and costs have tripled

The removal of the fuel is expected to be completed by the summer of 2023 but the plant will only be fully decommissioned by 2040 at the earliest.

Shutting down Fessenheim became a key goal of anti-nuclear campaigners after the catastrophic meltdown at Fukushima in Japan in 2011.

Experts have noted that construction and safety standards at Fessenheim, brought online in 1977, fall far short of those at Fukushima, with some warning that seismic and flooding risks in the Alsace region had been underestimated.

Despite a pledge by ex-president Francois Hollande just months after Fukushima to close the plant, it was not until 2018 that President Emmanuel Macron's government gave the final green light.

“This marks a first step in France's energy strategy to gradually re-balance nuclear and renewable electricity sources, while cutting carbon emissions by closing coal-fired plants by 2022,” Prime Minister Edouard Philippe said earlier this week.

France will still be left with 56 pressurised water reactors at 18 nuclear power plants — only the United States has more reactors, at 98 — generating an unmatched 70 percent of its electricity needs.

The government confirmed in January that it aims to shut down 12 more reactors nearing or exceeding their original 40-year age limit by 2035, when nuclear power should represent just 50 percent of France's energy mix.

But at the same time, EDF is racing to get its first next-generation reactor running at its Flamanville plant in 2022 — 10 years behind schedule —  and more may be in the pipeline.

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