The group CFO of French power giant EDF has resigned, reportedly over fears that the cost of funding Britain's first new nuclear power plant in decades could endanger the company’s financial status.
EDF did not comment on the reasons behind Thomas Piquemal’s departure, but sources close to the company told Bloomberg that Piquemal had argued against committing to a final decision to invest in the £18bn Hinkley Point nuclear power plant.
In October last year EDF signed a deal with China General Nuclear Power Corporation (CGN) to build the plant, located at Hinkley Point in Somerset, with the Chinese group agreeing to pay a third of the cost of the £project in exchange for a 33.5% stake.
After a number of delays EDF was expected to announce how it intended to fund the project in the next few weeks, but reports have recently circulated that it was unable to find the cash for the remaining 66.5% of its stake, and was seeking help from the French government, which owns 84.5% of the company.
EDF has rising debts, apparently in the region of 37bn Euro net, and has come under pressure from record low wholesale electricity prices. It also recently borrowed billions in order to pay dividends to its state shareholder, and is also grappling with the need to spend tens of billions of Euros upgrading reactors in France.
It was reported that Piquemal believed that the company was unable to commit the necessary cash for such a large project at the moment, and told EDF CEO Jean-Bernard Lévy last week that the company should delay any investment decision for a further three years.
However, this was allegedly rejected by Lévy, a move that ultimately led to Piquemal’s departure. The company has appointed Xavier Girre as interim group CFO. Girre joined last year as finance director of its French business unit.
Piquemal’s exit is the latest setback to a project beset by controversy and delays. Originally due to start generating power in by 2017 and produce 7% of the UK’s total output, construction was delayed several times last year after EDF postponed a decision to invest in a project that the British government calls ‘essential for meeting Britain's energy security’.
The UK government also came under fire after guaranteeing to pay suppliers £92.50 per megawatt hour of electricity: a figure that is more than double the current cost.
|Expert analysis - Tony Roulstone of the Cambridge Nuclear Energy Centre (part of Cambridge University)“We’ve already seen some internal dissent inside EDF about whether they can afford it [Hinkley] with the delayed board meetings in January and February, and with the CFO leaving this has elevated the seriousness of it.
“The [French] unions are firmly against it because they realise that there’s a lot of investment into the 50-odd nuclear power stations in France, and that’s going to provide a drain. EDF had to borrow to pay their dividends last year, so right now they’re in a difficult position and the share price is down so the worth of the company is probably less then Hinkley at the moment.
“EDF bought British Energy in 2008 for £8-10bn, and part of the deal was that the British government would help smooth the way for EDF to build power stations using their own design. At the time EDF’s share price was very high, but it has since come down by almost 90%. This was before the crash, before the fall of the price of oil brought energy prices down. Financial conditions were quite different to what they are now, and so it wasn’t foreseen.
“The reason EDF was brought in originally is because the government wanted private money to go into these stations. They went round the biggest utilities in Europe and invited them to the UK on the basis that they needed the company with the biggest balance sheet in the world in order to stand the cost of building.
“From what I understand the CEO of EDF is still keen, President Hollande is still keen, and the French state is behind this. The first port of call is to see what sort of deal EDF and the French government can do to make it possible. What funding is the French state going to provide? What are the types of guarantees? What are the fall backs? That, at the moment, we can’t see.”