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France says will recapitalise energy giant EDF 'if there's a need'
by Staff Writers
Paris (AFP) March 17, 2016

The French government stands ready to inject fresh capital into energy giant EDF if necessary, Economy Minister Emmanuel Macron said on Thursday.

"If there is a need to recapitalise, we will do so," Macron said during a visit at the Civaux nuclear station in central France.

"If we need to forego dividends again, we will do so," he added.

EDF, 84-percent owned by the French state, has reportedly asked the government to help it finance a contested plan to build a next-generation power plant in Britain.

French leaders have publically thrown their support behind the 18-billion ($26 billion, 23 billion euros) project at Hinkley Point in southwest England despite growing concern over its price tag that reportedly prompted EDF's finance chief to quit.

Funding that scheme comes on top of EDF's existing debt pile of more than 37 billion euros as it seeks to overhaul its French nuclear plants as well as finance the takeover of the reactor arm of struggling nuclear giant Areva.

Last month, the government accepted dividend payments in shares rather than cash, saving EDF some 1.8 billion euros ($2.0 billion).

"We will all make an effort. The government as shareholder has started doing so," Macron said, acknowledging that the government had been "too short-termist" in its dealings with EDF in recent years.

But a source close to negotiations between EDF and the government told AFP that the utility's chairman, Jean-Bernard Levy, is also pushing the state to accept a capital increase to cover Hinkley Point expenses. "That is the only solution to finance this kind of project," the source said.

Such a cash call would have to be for at least five billion euros, said Alphavalue analyst Juan Camilo Rodriguez, enough to cover EDF's cash flow needs for the next three years.

But that would still leave a question mark over EDF's longer-term future in the face of falling electricity prices and losses in income from France opening up its energy markets to competition, analysts said.

As the French government is strapped for cash, it will lean towards solutions that don't involve handing out money, like converting dividends into stock for several years to come, analysts said.

Another such option would be the partial sale of EDF unit RTE, which manages energy transmission. Analysts at brokers Natixis said recently that the sale of 25 percent in RTE would net EDF around 3.5 billion euros.



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