Shareholders in Ã‰lectricité de France (EDF) agreed on Tuesday (26 July) to issue €4bn in new shares, €3bn of which will be bought by the government of France.
Jean-Bernard Levy, the chief executive of EDF, told shareholders: "The increase in capital will reinforce the company’s own funds… to cope with all of the essential investments that need to be made." He said the fresh capital would help the company protect its credit rating and therefore its ability to refinance its debt at affordable rates.
The company, which is 85% owned by the French state, has more than €37bn of debt and is faced with a number of tough challenges in the nuclear field.
The most immediate is the decision to go ahead with the Hinkley Point power station in the UK, a €21.5bn scheme that it is undertaking in partnership with China General Nuclear. In March of this year, Thomas Piquemal, EDF’s finance director, resigned over this scheme, which he said would place too much strain on the company’s balance sheet.
A decision on whether or not to go ahead with this scheme is expected to be made by the EDF board tomorrow (28 July).
Underlying the cost of this project is anxiety about the performance of its two Areva reactors. The third-generation European Pressurised Reactor (EPR) design has an energy output of 1.65GW, making it one of the most powerful in the world, however two of the projects in which they have been installed – Flamanville in France and Olkiluoto in Finland – have suffered severe time and cost overruns.
In June, the French government ordered EDF and Areva, which is 80% state owned, to expedite their planned merger. This had been under discussion since Areva announced a €4.8bn loss last year.
The company is also faced with the need to renovate France’s own nuclear power stations. EDF presently runs 58 nuclear reactors in its home market, which produce 75% of its electricity. The average age of these stations in 2015 was 30 years, and in February of this year France’s Court of Audit estimated that EDF’s reactor life extension program to 2030, would come to about €100bn, including €25bn in operating costs.
Image: A computer rendering of Hinkley Point C (EDF)