The State considers a new reform of EDF

A “plan B” aims to refocus the company on nuclear power and dams. A resale of EDF’s renewable activities would make it possible to finance the new EPRs. Engie dreams of preparing for his exit from Russian gas.

The world of energy is in crisis. The output of Russian gas Y the renaissance of nuclear energy in France they are shuffling the cards of the two giants EDF and Engie. To the point that within the State, shareholder of the two companies, unprecedented reflections are being produced regarding their strategic future. The Ministry of Economy, Finance and Recovery is analyzing a scenario of global restructuring of the sector, in relation to the Elysee, which would take place in three stages.

According to various sources close to public authorities, this scheme is based first on the nationalization of EDF, which Emmanuel Macron mentioned during his presidential candidacy speech on March 17. It would then consist of a sale of EDF’s renewable energy activities as part of the electrician’s new focus on nuclear power and dams.

“The idea of ​​this scenario is that the funds raised allow finance the construction of the six EPRs“says a former EDF executive.

A nugget of 15,000 million euros

EDF’s renewable pole, in solar and wind power, will weigh 37 gigawatts in 2024. It generated 815 million euros in margins last year and its sale could bring in around 15 billion euros, according to bankers. The reactivation of a nuclear program is estimated at 50,000 million euros with “massive public investment”, they remind us from the Ministry of Economy.

To the best of our knowledge, these exploratory discussions have not, at this time, led to any decisions. “But they are on the table,” says a good connoisseur of the file. They are fed by the US bank Goldman Sachs, which builds various scenarios about the future of EDF on behalf of Bercy. The Ministry of Economy assures that “it does not have any order from the minister on this scheme that is not in the discussions.”

The EDF crisis is accelerating

The representatives of the State must, starting in May, resume negotiations with the European Commission on the future of EDF. But the company’s situation has worsened in recent months. Your financial results will be bad for 2022 and 2023 since it has just completed its public rescue of 3,000 million euros. Reactor shutdowns linked to corrosion phenomena it is likely to last until next year. And the electricity supply is stretched, in a context in which France is preparing for gas shortages for the coming winter.

“This context forces the State to study options unimaginable a few months ago,” adds a leader of the sector, terrified by these prospects.

The reform of EDF will be one of the Government’s priorities as of June. “The regulation of nuclear prices will determine the contours of the future group, specifies a source close to Bercy. And not the other way around.” After the failure of the “Hercules” plan last year, “the State is carrying out a review of the scope and organization of EDF”, explains an actor in the sector. Reflections that are beyond doubt for investors. Oddo analysts believe that “The hypothesis of rapid nationalization with a view to a complete reorganization of EDF is no longer taboo”.

Anticipating Engie’s Difficulties

This “plan B” is also motivated by the evolution of the gas situation. France wants to cut Russian gas imports by two-thirds by the end of the year and do without it by 2027. A goal that will weigh heavily on Engie’s profile, whose margins still depend half on gas. Not to mention the impact of the expansion of two of its seven nuclear reactors in Belgium.

The sale of EDF’s renewable activities could benefit the gas giant. And Engie dreams of it: “if they were for sale, we would obviously be very interested,” says a source close to the group. The company has just completed a refocus on gas and renewable energies after the sale of its activities in water, with Suez, and in services, with Equans. Thanks to these disposals, Engie has a war chest of 10,000 million euros in cash to invest in renewable energy. A sum that would be very useful for EDF…

Engie also has the State as its main shareholder (24%), which could itself orchestrate the reorganization of the energy sector in France around EDF and Engie. “Emmanuel Macron has always wanted to put the sector back together,” says a regular visitor to the Elysée. He already had this desire when he was Minister of the Economy. A takeover of EDF’s renewable branch by Engie “would solve EDF’s strategic problem and at the same time Engie’s”, concludes a person well acquainted with the two groups. He echoes Emmanuel Macron’s mysterious phrase a month ago: “We will have to regain capitalist control of various industrial players.” With EDF and Engie, the State would have two “armed arms” in nuclear and renewables.

Matthew Pechberty BFM Business Journalist

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