The French state already owns 84% of Électricité de France (EDF) but wants total control of Europe’s largest electricity generation and distribution company. Yesterday, the Ministry of Economy and Finance finalized the details of this full nationalization. It will be done through a simplified takeover bid of €9,700 million.
The EDF operation was announced two weeks ago by Prime Minister Elisabeth Borne when she presented her government program to the National Assembly. The expensive investment is officially justified with the need for maximum energy sovereignty, which has become even more urgent due to the war in Ukraine and the sanctions against Russia.
EDF is a highly indebted company with management problems in recent years
In reality, the reasons are more complex and hide a worrying situation. EDF is a highly indebted company with management problems in recent years. Basically, the state is using taxpayers’ money to bail out a limping giant so it can make the multi-million dollar investments that the projected construction of six new state-of-the-art nuclear power plants will require in 2018 and decades to come. The final bill for the state may far exceed the cost of the takeover bid.
Due to the doubts or wrong decisions of the last governments, the French nuclear park is very old and the current reactors often have to be shut down for maintenance. However, almost 70% of the electricity produced in France is of nuclear origin.
EDF’s full renationalization comes 17 years after its partial privatization. The move is therefore a step backwards, forced by geopolitical circumstances and the challenge of climate change. The original intention was to gradually reduce the nuclear share of France’s energy mix, but global warming, which is becoming increasingly alarming, as evidenced by frequent heat waves, and the Ukraine crisis have prompted a paradigm shift.
The offer will be submitted to the AMF in early September
The takeover bid addressed to EDF will be submitted to the Financial Markets Authority (AMF) in early September, pending the National Assembly’s approval of the pending 2022 budget amendment, an amendment that will precisely finance extraordinary expenses such as the acquisition of all shares in the electricity company becomes. The state proposes 12 euros per title, 53% more than the price on July 5, the day before the Prime Minister’s announcement, and 34% more than the average of the previous 12 months. So that there are no loose ends left, the state also buys the bonds with an option to convert them into shares.
Yesterday, EDF shares rose almost 15% on the Paris Stock Exchange and were already very close to the offer price.