EDF’s planned restructuring goes on hold

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The major restructuring of France’s majority government-owned EDF is reported to hit a roadblock with the European Union.

The proposal to split the utility giant into essentially two parts, one focussed on green energy and the network assets named EDF Vert and the other on the nuclear business named EDF Bleu, is now likely to be deferred until after the next French elections in April 2022.

The so-called ‘Project Hercules’ restructuring was originally mooted by President Emmanuel Macron to secure the company’s competitiveness into the future. With the separation of the nuclear assets, it was anticipated that the debt-heavy and expensive to run sector could be supported with higher regulated tariffs while enabling the company to become more competitive with its more profitable green energy business.

With the French government being the major shareholder, European Union approval of any such change is required over competition concerns and that agreement has so far failed to be secured.

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According to the French news service FR24 citing Le Monde, 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.

Jean-Bernard Lévy, chief executive of EDF, was quoted in FR24 expressing his regret that “this essential reform” for EDF cannot take place now.

“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,” he was quoted as saying.

While the discussions with the European Commission are reported to be continuing, the issue is that time is fast running out to September for a law to be drafted and pass through the legislative procedure before the election.

Reuters has quoted a French government source as saying that substantial progress had been achieved in the discussions with the European Commission.

“But to date, we have not reached an overall agreement. Given that, it cannot be envisaged that we would submit a law to parliament if the main principles are not covered in a prior agreement.”

The proposal is that EDF Bleu would be state-owned while EDF Vert is listed on the stock exchange to support green energy investment.