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France to renationalize EDF – The New York Times

PARIS – France announced on Wednesday that it would renationalise its state-backed electricity giant to help guarantee the country’s energy sovereignty as Europe faces a worsening energy crisis due to the war of Russia in Ukraine.

The move would give the government more control to resolve a swirling storm of problems that have plagued France’s nuclear power program, Europe’s largest, at a time when President Emmanuel Macron has pledged to ease the pain of the rising cost of living by protecting consumers from soaring energy prices.

Elisabeth Borne, the French prime minister, told lawmakers in her first major speech to parliament on Wednesday that the change was necessary to ensure France’s energy independence while meeting a major goal of fighting climate change.

“The energy transition goes through nuclear,” she said.

Although France gets about 70% of its electricity from nuclear power, a larger share than any other country in the world, Ms Borne said it could no longer rely on Russian oil and gas either.

The government must ensure its energy sovereignty by owning 100% of the capital of the company, Electricité de France, or EDF, she said, compared to 84% currently. The company is the main electricity producer in France and operates all of its nuclear power plants.

Government economic interventionism is a strong tradition in France, though it mostly strayed from the radical nationalizations of the 1980s under François Mitterrand, the socialist president at the time.

However, the approach was symbolic for President Emmanuel Macron. A former investment banker, he was elected in 2017 on an openly pro-business platform that promised to cut regulation and cut government spending. But it didn’t take him long to follow in the footsteps of his predecessors.

In 2017, his government nationalized France’s largest shipyard, STX France, to prevent an Italian competitor from taking over. More recently, the Covid-19 pandemic and the conflict between Russia and Ukraine has accelerated his shift from free-market reformer to advocate of state intervention.

Mr Macron is now insisting that the government defend economic and energy sovereignty in order to strengthen France’s independence and achieve climate goals, including regaining control of key national industries.

France is less dependent than its European neighbors like Germany on Russian gas and oil. But to maintain this relative independence, modernizing the country’s aging nuclear reactors has become crucial for the government, as the war in Ukraine has driven up energy prices, fueling inflation and making the cost of living the one of the main concerns of the French.

In February, Mr Macron announced a €51.7 billion plan to overhaul France’s nuclear programme, which called for EDF to build the first of 14 gigantic next-generation pressurized water reactors by 2035.

Elie Cohen, an economist who has studied the nuclear sector, said that “the only solution is nationalisation” because “the government has chosen an energy mix centered on nuclear, and because EDF is now obliged to build more reactors whereas that he does not”. have the means to do so. »

The government had already hinted that it was considering renationalisation. During his campaign for his re-election, Mr Macron had told a press conference that he wanted to implement long-term energy plans which would involve “regaining capital control of several industrial players”.

EDF is one of the most important French industrial giants. Last year, the company employed more than 165,000 people and had sales of around 85 billion euros, or around $86 billion.

But most of France’s nuclear infrastructure was built in the 1980s and has suffered from a lack of investment that has come to a head in recent months with a mix of unexpected maintenance issues that have shut down around half of the country’s atomic reactors. country – the most in Europe. — and caused French nuclear production to fall to its lowest level in almost 30 years.

Problems included a two-year backlog in required maintenance for dozens of aging reactors that was postponed during coronavirus shutdowns; safety issues such as corrosion and faulty solder joints on systems used to cool a radioactive reactor core; and rising temperatures in the spring and summer which made it more difficult to cool the reactors.

Mr Cohen, who works at CNRS, France’s national research body, said that since its partial privatization in 2005, EDF has faced increasing industrial, financial and economic challenges.

In accordance with French and European competition rules, the company was forced to sell electricity to smaller third-party sellers at a price lower than its actual production costs and market prices.

The plan was intended to provide fair access to nuclear energy and fulfill a political promise to protect French households from rising energy prices, but it has proven to be penalizing for EDF.

As recently as January, the government ordered EDF to sell more nuclear power to its competitors in order to limit the increase in electricity prices in France, a measure which, according to Bruno Le Maire, the minister of Finance, would cost him up to 8.4 billion euros, or about 8.5 billion dollars.

The government has also sometimes ordered EDF to cap its prices to keep market prices low, which has the effect of squeezing the company’s margins, even though it is already in debt by 43 billion euros, or around $45 billion.

“EDF could not behave like a normal business, seeking investment and normal profitability,” Mr Cohen said.

Yves Marignac, a nuclear energy specialist at négaWatt, a research group in Paris, said the company “is no longer competitive under market conditions and no longer has financial resources”.

This gloomy economic situation has prevented EDF from meeting Mr Macron’s ambitious plans for a wave of next-generation atomic reactors, in line with France’s aim to reduce carbon emissions and reduce its dependence on foreign energy. .

“The renationalisation simply reflects the fact that EDF is not in a position to invest in the maintenance of existing reactors and in the creation of new reactors on the scale of the projects announced by the president,” Mr Marignac said.

“It marks the end of the illusion that nuclear power can blend into the private economy,” he added.

France created EDF in 1946, after World War II, by nationalizing and merging more than 1,400 small electricity producers. It remained in state ownership until 2005, when the company was partially privatized.

Although Ms Borne did not say whether the government would proceed with a nationalization bill or buy out the minority shareholders, who currently hold a 14% stake in EDF, her speech suggested the latter. EDF employees hold the remaining 1%.

“This development will enable EDF to strengthen its capacity to carry out ambitious and essential projects as quickly as possible for our energy future”, declared Ms Borne.

The French announcement came on the same day that European Union lawmakers voted to consider some gas and nuclear power projects as “green”, giving them access to cheap loans and even loans. state subsidies – a change France had been pushing for amid the growing push from Europe. weaning off Russian oil and gas.

Eurozone inflation recently hit a record high of 8.6% as the fallout from the war in Ukraine and the economic conflict it sparked between Russia and Western Europe continued to drive up inflation. energy prices – although France’s inflation rate, at 6.5%, is comparatively lower than other European countries.

Mr Macron’s newly appointed cabinet is expected to present a bill on Thursday to help the French cope with inflation by increasing several social benefits, capping rent increases and creating subsidies for the most vulnerable households. poor buy essential food items.

Liz Alderman contributed reporting from Georgia.

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