French environment minister raises prospect of EDF shake-up
France’s new environment minister has said that EDF must prove the viability of its next generation nuclear reactor before the question of new plants can be considered and re-raised the prospect of a change in the structure of the state-controlled energy giant.
“EDF should demonstrate that the EPR [European Pressurised Reactor, a next generation nuclear reactor] works, which is not the case yet. Nobody is able to guarantee a date for its connection to the grid. It also has to demonstrate that the EPR is competitive in terms of costs,” François de Rugy told French daily Le Monde.
However, Mr de Rugy, who is seen as more pragmatic than his predecessor, added that “we must get out of the religious war about nuclear energy” and “the important thing is to know the economic data in the nuclear field and in the field of renewable energies.”
The comments come as Mr de Rugy takes the reins of France’s environmental policy.
Last week French president Emmanuel Macron appointed Mr de Rugy as his new environment minister as part of a minor government reshuffle triggered by the surprise departure of Nicolas Hulot, the former television personality and longtime environmental campaigner replaced by Mr de Rugy.
France is preparing to unveil a multi-year energy programme this autumn, which will include details on the speed at which the country should pursue a government target to cut nuclear’s share of domestic electricity production to 50 per cent.
The question of whether new reactors will eventually be commissioned is of particular importance to nuclear-focused EDF.
Earlier this summer Jean-Bernard Lévy, EDF’s chief executive, told French lawmakers that future French EPRs built in a series, as opposed to the one-off prototype at Flamanville, could produce electricity at a cost of €60-€70 per megawatt per hour. That would be comparable with the £57.50/MWh price in the latest UK offshore wind contracts.
While an EPR in China has now been connected to the grid, the company’s flagship Flamanville plant in France, seen as a crucial marker for the technology, is seven years late and €7bn over budget. In July, EDF said the loading of nuclear fuel at Flammanville “is now scheduled for the fourth quarter in 2019 and the target construction costs have been revised from €10.5bn to €10.9bn.”
Mr de Rugy also refused to rule out changes to the “architecture” of EDF: “I have some ideas on the subject…I am not in favour of change on principle, but I think that the status quo is not in the interest of the state and the company. You really have to look at everything, not just the subject of the energy transition, but also the debt of the company, and that can indeed inspire changes.”
Ex-minister Nicolas Hulot had told the Financial Times last year that EDF needed to embrace a transition towards environmentally friendly energy rather than “resist” it. He added that this might require revisiting the structure of the company - analysts suggested EDF’s nuclear activities and riskier debt could be separated from its renewable, retail and network assets.
“The question of EDF’s structure is back on the table, and rightly so in our view. EDF is one of the largest utilities in the world with an Enterprise Value heading towards €150 billion and a wide range of business lines in different countries and with different risk profiles,” said Sam Arie at UBS.
“We certainly believe there could be value in a NewCo/OldCo separation – perhaps similar to the RWE/Innogy split in 2016, but potentially much larger and more significant,” added Mr Arie.