EDF will not be the last energetic to go to the infirmary | Opinion

Jean-Bernard Lévy’s harsh winter just got worse. A month after EDF’s CEO had to shut down four of its 50 nuclear power plants due to technical problems, the French energy company said it was closing another and facing an €8bn hit over a government plan to protect to homes from rising prices. It will not be the last European company to be caught in the crossfire of the 2022 energy crisis.

All things being equal, EDF should be insulated from the storm, which has seen wholesale gas prices quadruple in a year and drag down electricity costs. Passing on the increase to French citizens would have meant a 35% rise in tariffs, while the cost of running EDF’s nuclear power plants should have remained stable. JP Morgan analysts estimate that this would have increased EBITDA this year by 8 billion euros.

But French President Emmanuel Macron, facing an election this year, is determined to protect customers. Limiting retail price increases to 4% means that taxpayers and investors have to swallow the difference. That hurts EDF in several ways. First, it has to sell 20 terawatt hours of extra power to smaller rivals at €46 per megawatt hour. It then has to buy back that power at the much higher market price. EDF believes the impact of this on 2022 ebitda, plus the postponement of some rate hikes, could be €8bn. JP Morgan analysts believe the overall impact on the company from the blackouts and rate controls could be even greater.

Given that the French state owns 84% ​​of EDF, whose shares fell as much as 25% on Friday morning, the confiscation hurts both taxpayers and investors. EDF could try to recoup some of its aid through “deferred” tariff hikes in 2023, although Economy Minister Bruno Le Maire hinted on Thursday that the state and the company could absorb the full blow rather than have the consumers pay later.

The financial damage to EDF is much greater than the tax of 1,200 million pounds (1,400 million euros) to North Sea oil producers proposed by the Labor Party, in opposition to the British Government. Energy consumers in the UK and Italy, which is also considering intervening, face higher price hikes than in France. In the basic services infirmary there is room for many more victims.

The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, by Carlos Gómez Abajo, is the responsibility of Five days

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