The French state-controlled power giant Electricité de France SA will be the recipient of a massive €4.49 billion cash injection this year, as the French government moves to provide enough capital for the utility to pull itself out of debt following a slump in energy prices.
The enormous chunk of cash is aimed to make a number of high-cost projects possible for the company, after they were deemed political priorities by the government. EDF’s board confirmed on Friday that it had approved the capital funding through a “market operation” that will come to fruition before the end of the year, and added that it would continue to give shareholders the ability to take their dividends in further shareholding rather than cash, if that was what they wanted.
The French government confirmed also that it will be selling part of it’s 85% share of the company, and injecting €3 billion as part of that deal, as EDF moves forward with plans to sell €10 billion of its assets by 2020.
The deal couldn’t come at a better time for EDF, who can now use the capital to address concerns from their investors that they are floundering in the face of an energy price slump. EDF is currently €37.4 billion in net debt, while planning to invest in expensive future plans like a purchase of a majority stake in the French government’s nuclear reactor manufacturer, Areva NP. Moody’s Investor’s Services even placed EDF’s credit rating on review to be downgraded in February, but the new funding injection will allow the company to proceed with the reactor purchases and begin working toward complete self-sufficiency again.
Last month, before the funding was announced, Chief Financial Officer Thomas Piquemal quit the firm over concerns that the £18 billion Hinkley Point Nuclear Plant planned for Southern England would stretch the company’s funds dangerously thin, to which CEO Jean-Bernard Levy said that without a government cash injection, the company could not move forward.
The Hinkley Point nuclear plant is the keystone of a series of deals between the UK and China, with the China General Nuclear Power Corporation taking a 33.5% stake in the resultant generators. Areva, the nuclear generator construction company used, needs EDF to buffer it before this is possible, however, after losing billions on unwise investments in the past several years, and on dramatic budget overruns on nuclear reactors being built in France and Finland.