France said late Friday it would lead a four-billion-euro capital increase for power company EDF (Paris: FR0010242511 – news) , months after agreeing a similar cash injection for the other pillar of its nuclear industry, Areva (LSE: 0P4A.L – news) .
EDF, which is 85 percent owned by the French state, also pledged to cut millions more in costs and sell off assets in a bid to reduce its huge pile of debt.
The electricity giant has been hit by weak European electricity prices and hefty investments, notably its plans to help build Britain’s controversial Hinkley Point nuclear plant at a projected cost of £18 billion (23 billion euros, $ 26 billion).
On Friday, the company again postponed its final decision on whether to continue with the project, in which the China General Nuclear Power Corporation is also a partner.
Chairman and CEO Jean-Bernard Levy told the board he would first consult with EDF’s works council, as demanded by trade unions who have questioned the project’s feasibility.
A source close to the group told AFP the decision, which had been expected by early May, would now take “several weeks”. Union sources said it could take “two to three months”.
“EDF is a group that is already in debt — increasingly in debt — and it is vital that we bring this debt under control,” Levy said in an interview with the Figaro newspaper.
After hours of talks, the board gave the green light to raising four billion euros ($ 4.5 billion) of capital through a “market operation” to be carried out by the beginning of next year.
Paris will inject three billion euros, though where it will get the cash is unclear, following a similar capital increase for Areva in January backed by the French state.
In exchange, EDF will redouble its debt-cutting efforts, targeting cost reductions of at least a billion euros in 2019 compared to 2015 — well above original plans for 700 million euros of savings over three years.
The group also plans to raise 10 billion euros from selling off gas, coal and oil interests.
The measures are designed to help EDF better plan for the future, including paying for the maintenance of 58 French reactors and its takeover of the reactor arm of struggling nuclear giant Areva.
Unions, financial markets and even EDF’s former finance chief — who resigned in March — have for months cast doubts on the company’s ability to handle all its investments, particularly Hinkley Point.
France’s Economy Minister Emmanuel Macron repeated his government’s commitment Sunday to EDF’s plans to build the plant in southwest England.
But questions have been raised both about its financial viability and use of largely untested technology.
John Sauven, director of Greenpeace UK, said the latest delay to EDF’s investment decision “may now be the sign that the entire project is coming to a grinding halt” and showed the British government “urgently needs to back renewable energy as a more reliable alternative.”
Even (Taiwan OTC: 6436.TWO – news) if EDF could agree on the financing of the project, the European Commission could scupper it on the grounds that it was being built with “illegal state aid,” Sauven added.
