EDF faces state aid hurdle over Hinkley Point project
Financial Times, 2016-04-22
Kiran Stacey, Energy Correspondent
Any French government financial support to EDF to enable the company to build the Hinkley Point C nuclear power station in the UK would almost certainly be blocked by the European Commission, according to a legal opinion commissioned by Greenpeace.
The French government is this week discussing financial support for EDF, after Jean-Bernard Levy, chief executive, said the company needed fresh state help before it would give the long-awaited final go-ahead to the contentious £18bn Hinkley Point project.
Thomas Piquemal, EDF's chief financial officer, resigned in February, warning that Hinkley Point could threaten the company's future.
Critics have raised concerns about the £18bn cost, given EDF's stretched balance sheet. The company's €37bn of net debt dwarfs its €22bn market capitalisation.
But any French state attempt to justify financial support for EDF would almost certainly be rejected by Brussels, says the legal opinion by three barristers at London's Monckton chambers, which was commissioned by Greenpeace, the environmental campaign group opposed to nuclear power, and Ecotricity, the green energy supplier.
Ecotricity is likely to launch a legal challenge against any French government support for EDF.
The barristers' opinion says all possible routes for the government to support EDF would constitute state aid in the EU and therefore require review by Brussels.
"The provision of further state support for the Hinkley project by the French government would in the circumstances described be likely to constitute state aid . . . It would be difficult to justify such further measures as being compatible with the [EU] internal market," says the opinion.
The barristers consider four different methods open to the French government to help support EDF, which is 85 per cent state-owned.
The first is for the government to take future EDF dividends as shares rather than cash; the second is for a direct recapitalisation of the company; the third is for the state-owned bank CDC to provide support; and the fourth is for France to prop up the utility's French operations.
The lawyers conclude that a private investor would not credibly provide EDF with investment in any of these ways, meaning the case will probably be brought to the commission.
Other lawyers expressed doubts that the French state would be able to provide EDF with financial support on Hinkley Point.
Tim Malloch, a commercial litigator at Mishcon de Reya, said: "The commission made clear in 2014 that they would have to go back and approve any future aid [for Hinkley Point]. But since then the British government has said that the project is not needed for keeping the UK's lights on, so an approval would be less likely this time."
Conor Quigley, a barrister at Serle Court specialising in European competition law, said: "Since the European Commission has looked at Hinkley Point financing in other respects, I'm sure they would want to do so in respect of any French government action."
EDF's board will meet in Paris on Friday. People close to the company said they did not expect the final investment decision on Hinkley Point to be made.
Vincent de Rivaz, the head of EDF's UK operations, has hinted that the decision will be made at a board meeting on May 11.
EDF and the European Commission did not respond to requests for comment.
On Thursday, EDF's central works council, an official forum for the management to talk with trade union representatives, threatened legal action if it is not consulted on Hinkley Point before the final investment decision is taken by the board.
The body issued a statement saying that the company was facing an "unprecedented financial and industrial situation" and that Hinkley Point was the "subject of disagreements in approach between the elected staff and management".
The works council has to be consulted before any decision was made, it said, or it will "be forced to take legal action to obtain the suspension and cancellation" of the project.