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The new boss of EDF is conducting a portfolio review that could lead to French energy groups selling some assets as they try to meet government demands to focus on building new French nuclear reactors.
Bernard Fontana told insiders she wanted to assess which assets are not making profits or fit into the strategic priorities of state-owned groups, according to some people with knowledge of the situation.
Fontana, who took over as chief executive of the state group last month, told people that sales could come after reviews, but has yet to conclude which portions should be sold.
The state said “we must make a successful French new nuclear program and utilize the current nuclear centre. The rest must be arbitrated if there is no means,” one of the people said.
This review was made after Fontana replaced Luc Rémont. Luc Rémont repeatedly clashed with the government over strategy and was kicked out in March for less than three years of work.
The EDF is responsible for operating the French fleet of 57 reactors, similar to the UK nuclear power plants.
Other assets and subsidiaries include Framatome, the Construction Engineering division, where Fontana was previously CEO. Renewable facilities in France and around the world, Italian utility business Edison and service company Dalkia.
Several people familiar with EDF said it was one of the business units that Dalkia and Edison can sell. People said renewable assets, excluding EDF’s hydraulic projects, could also be under consideration.
A review of the portfolio shows that Fontana is more consistent with the French government than his predecessor, people said. One of them said Fontana is “trying to move further from a conflict with the government.”
Lemont clashed with the Minister over his strict approach to negotiations on the new reactor financing mechanism.
France is planning to build two models of EPR (EPR2) that are being developed at Hinkley Point C in the UK, and is used in France’s latest reactor Flemmanville 3.
He also failed to reach a commercial agreement with the industry group over energy supply, which is deemed important to ensure the competitiveness of French industries, but several people said in the financial era that the original boss was opposed to the sale of large assets.
The EDF declined to comment and mentioned Fontana’s statement at a Congressional hearing prior to his confirmation, where he said he could make asset sales to “release the room to make an investment.” He added that EDF wants to remain an integrated business.
“Bernard Fontana doesn’t have the same perspective as (Lemont) and I think he’s ready to see what assets he thinks he’s absolutely necessary for the future of EDF,” one of the people said.
Still, if they seek to sell assets during a challenging economic environment, the company’s objectives can be complicated, especially in the US, where there are many offshore wind and solar projects, which could force some assets to be offloaded at deep discounts.
Additionally, asset sales rarely meet the enormous costs of offering a new EPR2 program, said business-savvy people. The government and the EDF recently agreed to a funding mechanism for the project, but the total cost has not yet been determined.
It’s a complex economic equation unless you build EPR2, guarantee low energy prices to consumers and industrial groups, complete Hinkley Points, and meet other priorities in the EDF, and someone finds a magic wand,” one of the people said.
