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France weighs EDF restructuring scenarios, nuclear spinoff-sources
November 23, 2017 / 1:56 PM / 17 days ago

France weighs EDF restructuring scenarios, nuclear spinoff-sources

* Finance ministry looking at EDF restructuring scenarios

* One option is to spin off nuclear power in standalone unit

* EDF itself not involved in evaluation scenarios

* Investment bankers pitching ideas to state holding APE

By Geert De Clercq and Benjamin Mallet

PARIS, Nov 23 (Reuters) - The French finance ministry is studying several scenarios for restructuring state-owned utility EDF, including spinning off its nuclear power generation activities into a standalone unit, sources familiar with the situation said.

EDF, which is 83 percent owned by the state, has hefty net debt of 31 billion euros ($36.7 billion) and is poorly placed to make the investments needed to upgrade its ageing nuclear plants.

The finance ministry declined to comment but Energy and Environment Minister Nicolas Hulot told the Financial Times last week that the government is considering changing EDF’s governance to shift its focus from nuclear to renewable energy and that this process may require restructuring EDF.

“Bercy (the finance ministry) is working on this topic. Some people at Bercy consider that (a nuclear spinoff) would be a good solution,” a source familiar with the situation said.

Several sources said that EDF’s board had not been consulted on the subject and that the firm’s management has no working groups reviewing possible restructuring scenarios.

EDF shares rose more than three percent in morning trade on speculation about a restructuring, traders said.

BFM TV reported on its website that in one scenario wholesale power prices would be based on EDF’s nuclear operating costs and set by energy regulator CRE, similar to the way the CRE sets tariffs for EDF’s power grid units Enedis and RTE.

“The scenario of spinning off nuclear would aim to make it an essential facility where everybody could buy power at the same price,” a second source familiar with the situation said.

Currently, EDF is legally required to sell up to a quarter of its nuclear electricity to competitors at the regulated price of 42 euros per megawatthour, regardless of its costs.

The second source said that investment banks eager to advise on a restructuring are pitching several scenarios to state holding company APE.

“Several scenarios are circulating, but for now these come mainly from investment banks,” the second source said.

Earlier this week UBS published a note saying a separation of EDF assets following the model of Germany’s RWE and Innogy could potentially release significant value.

UBS said one company similar to Innogy could hold EDF’s grids, renewables and retail activity, while a second company could hold EDF’s nuclear and thermal activities.

“When he was working at Bercy, President Emmanuel Macron had talked about breaking up EDF, separating nuclear from the rest,” said a third source familiar with the situation.

In a March 2016 speech to parliament, Macron raised the possibility of delisting EDF’s nuclear activities, saying that while a bourse listing is pertinent for selling nuclear reactors abroad, it is not optimal for producing nuclear power in France. ($1 = 0.8442 euros) (Additional reporting by Leigh Thomas; Writing by Geert De Clercq; editing by Richard Lough)

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