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EDF faces state aid hurdle over Hinkley Point project

Posted on 22 April 2016. Source: Financial Times

EDF faces state aid hurdle over Hinkley Point project

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.

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.

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 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.

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