Hinkley Point indecision continues

26 April 2016

Electricite de France will delay the final decision on whether to proceed with its GBP18bn ($26bn) NPP at Hinkley Point C in the UK by several months, Bloomberg reported on 22 April, citing a person familiar with the matter.

CEO Jean-Bernard Levy has decided to push back the decision, previously scheduled to be taken by May, in order to consult with employees, the source said. Trade unions threatened on 21 April to take the company to court if workers are not consulted.

In an interview with Sunday paper Le Journal du Dimanche on 24 April, French Economy Minister Emmanuel Macron said President François Hollande had "confirmed France's engagement" in the project and that the "final decision will be given in September". He noted: "Even with the latest contract, the reactor will not be operational until 2030. The British can't wait any longer; otherwise they will be forced to choose one of our competitors."

He said three conditions were necessary for the project to go ahead. These included: the strengthening of EDF's financial situation, which would be assured by a €4bn ($4.5bn) capital increase announced on 22 April; a consultation with trade unions; and unspecified measures to ensure the operational execution of the plants' construction. Other EPR reactor projects, in France and Finland, are billions of euros over budget and years beyond schedule.

The final decision on the UK project has been repeatedly delayed amid doubts over its viability, despite EDF's partnership with China General Nuclear Power Corp and secured guaranteed power prices from the UK government. EDF's finances have been strained by falling power prices and rising competition, which put in doubt future earnings needed to fund a €50bn ($56bn) programme to refurbish its French NPPs by 2025.

There has been speculation about the future of the Hinkley Point plant since EDF's Chief Financial Officer Thomas Piquemal resigned in March, saying it would put the company under too much financial strain. EDF on 21 April named Xavier Griffe as its new finance director. Griffe, an executive at the company, has been doing the job on a temporary basis since Piquemal's departure.

The Financial Times reported that a group of EDF managers have sent a letter (dated 19 April) to its board of directors warning they could all face legal action if the company pushes ahead with Hinkley Point. The letter said that if a board decision in favour of Hinkley Point led to the "destruction of the value" at the group, its directors could be held personally responsible. Most of the EDF board members had been expected to vote in favour of the final investment decision on Hinkley Point at a meeting scheduled for 11 May. Three people familiar with the letter reportedly confirmed its contents to the FT. It recommended that the board should commission a series of extra studies on Hinkley Point, convene a special shareholder meeting, as well as talk to the French market regulator and lawyers.

The letter said the board should have more facts at hand about Hinkley Point before making any decisions, to protect directors from legal troubles if the project runs into problems. It also asked for details of which lawyers and bankers were working for EDF on Hinkley Point, as well as an analysis of the potential economic risks associated with the project. It also asked for an analysis of the cost of not going ahead. The FT cited one of the people involved as saying 500 EDF employees in management positions supported the letter, including some division heads. Most of these people were also small shareholders in EDF, he added.

Meanwhile, an EDF employee shareholders group has asked the AMF market regulator to force the French state to buy out the utility's minority shareholders, in a dispute over its UK plans, according to Reuters. EDF Actionnariat Salarie (EAS) asked the market regulator to consider requiring the state to launch a public withdrawal bid. EAS alleges that the government is abusing its position as a majority shareholder by forcing EDF to go ahead with the project, which EAS says is too risky for EDF and will prevent it from paying dividends in coming years. "The Hinkley Point financing will block shareholders from getting dividends over the 2017-2025 investment phase," it said.

Withdrawal bids are generally used to mop up unsold stock following a takeover, rather than by minority investors forcing a majority shareholder into making a bid against its will. EAS argues that in pushing the project, the government is defending the interests of the French nuclear industry rather than those of EDF, at the expense of its minority shareholders. EDF declined to comment. "While the state only owns 85% of EDF's capital, it behaves as if it is the sole proprietor and uses the company as a lever for its industrial policy," EAS said. The AMF and the economy ministry were not immediately available for comment, Reuters said.

Macron said in March that dropping the Hinkley Point project would have grave consequences for investment and employment in the French nuclear industry. Hinkley Point is seen as crucial for the survival of reactor builder Areva and France's many smaller nuclear companies, in an industry that employs about 200,000 people. With three quarters of its power generated by nuclear, France needs no more reactors, and export prospects are limited after the 2011 Fukushima disaster.

The majority of the trade unions representing employees at EDF have spoken out against Hinkley Point, and in March a group of engineers called for at least a two-year delay with the project and recommended a redesign of the reactor technology. However, in April a group of more than 100 EDF engineers wrote a note in support of the project.

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