EDF plans to sell as much as €10bn of assets over five years to shore up its balance sheet, as the French energy group prepares to start the expensive process of building three UK nuclear reactors.
The French state-controlled utility is considering the sale of the exploration and production operations of Edison, its Italian subsidiary, as well as its stake in American nuclear group CEGN, as part of efforts to maintain its credit rating, said two people familiar with the company.
News of the €10bn disposal plan — first reported by Les Echos — comes as China’s president Xi Jinping visits the UK for the first time this week, amid hopes that EDF and Chinese investors will agree a commercial pact on the construction of Hinkley Point C, the first of the new plants.
The two sides have been trying to strike a deal on their share of investment in the £24bn Hinkley Point project in Somerset, with a team led by China General Nuclear Power Group reluctant to raise its interest beyond 30 per cent.
Ministers are hopeful that a "heads of agreement” will be signed with a final investment decision to follow. Beijing would be involved in the construction of a second power station at Sizewell in Suffolk and take a majority stake in a third plant at Bradwell, in Essex, using its own design.
Jean-Bernard Lévy, chief executive of EDF, said on French television on Sunday: "If all goes well, we will be able to announce major news in coming days; the first nuclear new-build in Europe since the Fukushima accident.”
However, rating agencies Moody’s and Standard & Poor’s say the French group will struggle to keep its credit rating if it takes the lead in the first UK projects without disposals.
In a note last month, S&P said the Hinkley Point C project "could negatively affect the group’s business risk profile and potentially its cash flow trajectory”. It described EDF’s goal to have positive free cash flow after dividends by 2018 as already "challenging”.
EDF, which is 87 per cent owned by the French state, is also preparing for a large outlay on the reactor division of French nuclear group Areva as part of a deal negotiated alongside the government to save its rival earlier this year.
The French group agreed in principle to buy between 51 per cent and 75 per cent of Areva NP, which will cost between €1.3bn and €2bn if the deal closes as expected next year. EDF is looking for other partners to take a stake alongside it in Areva NP.
Finally, the company was this year hit by additional cost overruns of €2bn on its Flamanville reactors project in northern France, which is now expected to be up and running in 2018 at a total cost of €10.5bn.
Recognising these issues, Mr Levy in July announced a "strategic review” of its fossil-fuel fired power generation assets in continental Europe, and fossil fuel production and sales outside France.
Other possible assets to be sold include some of EDF’s Polish assets, such as a 1.8GW coal-fired power station.
EDF’s electricity transport unit RTE has long been seen as a potential sale target, but one person close to the company said this was not being pushed for the moment. The person said a full sale of Edison in Italy was also unlikely.
EDF declined to comment.
(Financial Times)
