“Disruption of negotiations with Brussels, robbery of the French state by selling electricity at low prices to your competitors… What are you doing to protect the interests of minority shareholders from the state?”, launches individual shareholder Jean-Bernard Levy, CEO of EDF. In Salle Pleyel, where this Thursday, May 12 (for the first time in two years), a general meeting of the group is being held face to face, applause is heard.
A few minutes earlier, another shareholder was touched by the sharply falling share price and “Shipwreck of this beautiful ship”. In 2005, he bought shares in EDF at a price of 32 euros. At that time, “this investment was presented as a good father’s investment”, he remembers. Today, the share price barely exceeds 8 euros. After a few very technical questions, we will talk again about “disappointment of small shareholders in the price of shares.” There is a general concern in the hall for the future of the group. Legal care.
Reassure worried shareholders
“We are experiencing operational difficulties. I have no doubt that shareholders are also suffering”acknowledged by Jean-Bernard Levy.
Post-2021 economic results “very good score” a group 84% state-owned is preparing to endure a black year. And this is for two reasons: the historical unavailability of its nuclear fleet, associated, among other things, with the problem of corrosion, as well as the tariff shield introduced by the state. This system obliges the company to sell more nuclear power to its competitors at a reduced price (via the Arena mechanism) in order to limit rising consumer bills. In 2022, it will cost him about 10 billion euros.
The EDF leadership has never made a secret of their dislike of this measure. In an internal message to EDF leaders, Jean-Bernard Levy personally criticized the government’s decision, citing “real shock”.
“Both the price and the conditions of these allocations greatly infringe on us”he repeated to the audience of shareholders.
If the latter can express doubts about the leader’s ability to protect this French flagship, then Jean-Bernard Levy seems determined to protect the tricolor ship.
“I have just sent a courtesy letter to the state asking for it to be withdrawn,” he objected.
This action may well be the first in the history of EDF. And even if this scenario were not new, it would still be less commonplace. There are rare cases when a group, overwhelmingly supported by the state, rebels against the state. With this kind appeal, the EDF leadership hopes that the government will reconsider its decision.
The state has two months to respond. In the event of a negative or no response (which would be the cost of a denial), EDF does not exclude the possibility of recourse to the competent administrative jurisdiction. Then the confrontation between the electrician and the French state will be played out in court.
Investment wall cladding
The stakes for EDF are high. Already in debt of 43 billion euros, the group must face a wall of investment. In the period 2022-2028, the Grand Carénage, which aims to modernize the existing nuclear fleet, is valued at 33 billion euros. This sum does not take into account the effects of the stress corrosion phenomenon, which is currently under investigation. In addition to this extensive program, the construction of six new EPRs, desired by the re-elected president, is underway, the cost of which is estimated at no less than 50 billion euros. EDF must also invest heavily in renewable energy, where it clearly lags behind its European competitors such as Italy’s Enel and Spain’s Iberdrola.
Jean-Bernard Levy repeated this several times: there is a risk of getting into the second division. Worse still, EDF, or at least part of it, could be taken over by another heavyweight in the sector, Engie, who has made no secret of his interest in his renewable energy activities. A scenario currently vehemently rejected by the government.
Save strength for Brussels
Jean-Bernard Levy, however, will not have to exhaust all his strength in this conflict, which pits him against the state, because the real hand-to-hand fight will be played out in Brussels. In fact, France must urgently defend the reform of the group in order to be able to finance a new nuclear program without deviating from competition rules that are very expensive for the European Commission. “We need a structural reform in the EDF, and it needs to be done quickly enough”insisted Jean-Bernard Levy this Thursday, May 12, while negotiations with the commission should resume as soon as legislative elections were held.
Jean-Bernard Levy, heading the national electrician since November 2014, is the only EDF leader to be re-elected for a second term in 2019. The term expires in May 2023. Thus, Captain Levi still has 12 months before him to demonstrate his ability to protect the EDF vessel. Will individual shareholders be more satisfied at the next general meeting, Mr. Levy’s last? It’s hard to see what that might look like as the EDF file is like a puzzle.