The liabilities of Électricité de France (EDF) − the biggest electricity supplier in Europe, with 39 million customers − are increasing so fast that they will soon exceed its assets, according to a report by an independent equity research company.
Bankruptcy for EDF seems inevitable − and if such a vast empire in any other line of business seemed to be in such serious financial trouble, there would be near-panic in the workforce and in governments at the subsequent political fall-out.
But it seems that the nuclear-dominated EDF group is considered too big to be allowed to fail. So, to keep the lights on in western Europe, the company will have to be bailed out by the taxpayers of France and the UK.
The French government, facing elections next spring, and the British, struggling with the implications of the Brexit vote to leave the European Union, are currently turning a blind eye to the report by AlphaValue that EDF has badly under-reported its potential liabilities.
Ageing nuclear reactors
While EDF is threatening to sue people who say it is technically bankrupt, the evidence is that the cost of producing electricity from its ageing nuclear reactors is greater than the market price.
Coupled with the impossibility of EDF paying the full decommissioning costs of its reactors, it is inevitable that it is the taxpayers in France and the UK who will eventually pick up the bill.
There is also the ongoing thorny problem of disposing of the nuclear waste and spent fuel rods, which are building up in cooling ponds and stores on both sides of the Channel, with no disposal route yet in sight.
A looming problem for EDF, which already admits is has €37 billion of debt, is that 17 of its ageing fleet of nuclear reactors, which provide 70 per cent of France’s electricity, are being retired.
According to AlphaValue, EDF has underestimated the liabilities for decommissioning these reactors by €20 billion. Another €33.5 billion should be added to cost of handling nuclear waste, the report says.
Juan Camilo Rodriguez, an equity analyst who is the author of the report, says that a correct adjustment of nuclear provisions would lead to the technical bankruptcy of the company.
In a statement, EDF said it “strongly contests the alleged accounting and financial analyses by the firm AlphaValue carried out at the request of Greenpeace and relating to the situation of EDF”.
It says that its accounts are audited and certified by its statutory auditors, and that the dismantling costs of EDF’s existing nuclear power fleet have also been subject to an audit mandated by the French Ministry of the Environment, Energy and the Sea.
Even with its huge debts, EDF’s problems could be surmounted if the company was making big profits on its electricity sales, but the cost of producing power from its nuclear fleet is frequently greater than the wholesale price.
That creates a second problem − that unless the wholesale price of electricity rises and stays high, the company will make a loss on every kilowatt of electricity it sells.
The new rightwing French presidential candidate, François Fillon, promises not to retire French reactors and to keep them going for 60 years. But this cannot be done without more cost.
This is the third problem: vast sums of capital are needed to refurbish EDF’s old nuclear fleet for safety reasons following the 2011 Fukushima nuclear disaster in Japan.