By Dimitri Delmond 
 

Electricite de France SA's reorganization project is vital if the French energy group is to stay competitive against European rivals, Chief Executive Jean-Bernard Levy told a French Senate hearing Wednesday.

The reorganization project, known as Hercules, "is necessary because our development, our growth and our investments are seriously hindered by the levels of debt that we have built up for years now as a result of the Arenh regulation," Mr. Levy told the Senate's economic affairs commission, referring to France's nuclear-electricity access regulation.

"For me the Arenh is a poison that has directly contributed, in the space of 10 years, to making EDF into a player laden with debt, downgraded five times already by ratings agencies, and which has ceded more than 10 billion euros ($12.1 billion) in shares and been recapitalized to the tune of EUR4 billion, of which EUR3 billion were subscribed by the state," he said.

Mr. Levy said the Arenh mechanism subsidizes EDF's rivals, as it forces the company to sell its nuclear production below a price ceiling that doesn't cover costs and which hasn't been re-evaluated against inflation in 10 years.

The Hercules project has been the source of conflict between the EDF, the French government and the European Union, with the company's trade unions fearing a split into three divisions would lead to job cuts and a dismantling of the company. Negotiations around the project include a potential reform of the Arenh mechanism.

 

This story was translated in whole or in part from a French-language version initially published by L'Agefi-Dow Jones.

 

Write to Dimitri Delmond at ddelmond@agefi.fr

 

(END) Dow Jones Newswires

February 10, 2021 06:52 ET (11:52 GMT)

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