Oil report

UPDATE 1-EDF ordered to accept suspension of supply contract with Total

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PARIS, May 20 (Reuters) - The Paris commercial court on Wednesday ordered French state-controlled utility EDF to accept the suspension of supply contracts with energy major Total.

Total, with other power suppliers, had sought to invoke the force majeure clause in the contracts due to the coronavirus outbreak, which had pushed prices in the French electricity market far below that specified in the companies’ existing agreements.

In its verdict, seen by Reuters, the president of the court said the conditions for force majeure in the so-called ARENH contracts between the two companies have “evidently been met”.

He ordered EDF, which operates France’s 58 nuclear reactors that account for around 75% of the country’s electricity needs, to pay Total a 50,000 euro ($54,880) fine.

An EDF spokesman said the company would appeal the decision, while nobody was immediately available at Total to comment.

The force majeure clause allows certain terms of an otherwise legally binding agreement to be ignored because of unavoidable circumstances.

EDF, France’s energy market regulator and the State Council, the country’s highest administrative court, had all rejected the companies’ request.

Under the ARENH mechanism, EDF’s rivals can buy up to 100 terawatt hours (TWh), or about a quarter of its annual nuclear output, at a fixed price of 42 euros ($46.29) per megawatt hour (MWh).

However, the coronavirus outbreak and a general lockdown imposed by the government led to a 15% to 20% drop in electricity demand, according to French electricity grid operator RTE, and wholesale prices are far from the 42 euros/MWh suppliers paid for the ARENH contract.

The court said the procedure from AFIEG -- a lobby group representing energy companies including, Enel, Vattenfall, Alpiq, Endesa, and GazelEnergie who joined forces with Total -- was admissible. (Reporting by Benjamin Mallet; Writing by Benoit Van Overstraeten; Editing by Jan Harvey, Kirsten Donovan)