Électricité de France

Électricité de France
Type Public (Euronext: EDF)
Founded Paris, France (1946)
Founder(s) Marcel Paul
Headquarters Paris, France
Key people Pierre Gadonneix (Chairman of the board and CEO)
Industry Energy
Products Electricity generation and distribution
Revenue €59.64 billion (2007)[1]
Operating income ▲ €9.991 billion (2007)[1]
Profit ▲ €5.618 billion (2007)[1]
Employees 158,640 (2007)[1]
Website www.edf.com

Électricité de France (EDF) is the main electricity generation and distribution company in France. It was founded on April 8, 1946, as a result of the nationalisation of a number of electricity producers, transporters and distributors by the Communist Minister of Industrial Production Marcel Paul. Until November 19, 2004, it was a government corporation, but it is now a limited-liability corporation under private law (société anonyme). The French government partially floated shares of the company on the Paris Stock Exchange in November 2005,[2] although it retains almost 85% ownership as of the end of 2007.[3]

EDF held a monopoly in the distribution, but not the production, of electricity in France until 1999, when the first European Commission directive to harmonize regulation of electricity markets was implemented.

EDF is one of the world's largest producers of electricity. In 2003, it produced 22% of the European Union's electricity, primarily from nuclear power:

Its 58 active nuclear reactors (in 2004) are spread out over 20 sites (nuclear power plants). They comprise 34 reactors of 900 MWe, 20 reactors of 1.3 GWe, and 4 reactors of 1450 MWe, all PWRs.

On 24th September 2008 EdF announced that its wholly owned subsidiary, Lake Acquisitions, had made a recommended offer for the shares of British Energy Group PLC, which generates about 20 percent of British electricity, mainly from 8 nuclear stations.

Contents

Major Reform (1996-2007)

Status of EDF

EDF was an EPIC (public establishment with industrial and commercial character), and as such, it was subject to the "principle of speciality", that is it had the right to sell electricity; the purpose of this principle of speciality was to prevent EDF competing in an unfair way on their own markets.

EDF's modification of status, announced in March, 2004 by the French government, became effective, after the vote of the "Loi relative au service public de l'électricité et du gaz et aux entreprises électriques et gazières" (law relating to the public service of electricity and gas and in the electrical and gas firms) on August 9, 2004 by publication in the Journal officiel of November 19, 2004.

The transformation into a Société anonyme (public company) was implemented for several reasons:

Issues of reform

The status of EPIC created a competitive advantage which became unbearable for the electricity producers in other European countries, especially since the multitude of acquisitions which EDF had accomplished in the UK, Italy and Germany. Thus, they requested that the same 'rules of the game' apply for all.

For their part, EDF needed a juridical structure allowing it to reinforce its equity capitals and to receive investors. Its requirements in equity capitals were estimated in May 2004, between 10 and 15 billion euro.

Social welfare system

The specific regime of social welfare system and that of supplementary illness, cover 300,000 electricians and gas workers. A ratified agreement, in November 2004, by only two labour unions, reached a deadlock and the three others opposed BOB.

Finances

For a long time, EDF suffered from very low profits for a group benefiting from such monopoly, especially since in the weakness of its results on the domestic market, were added the poor performances of its foreign subsidiaries. Nevertheless, its balance sheet is very fragile, because of its international development, of its tariff policy in France and rapid deterioration of its profitability.

From 2001 till 2003, EDF was forced to reduce its equity capital due to untoward deviations of conversion in South America and write-down of its assets in Germany, Italy and in Brazil for a total of €6.4 billion total. However, according to the report of the Roulet Commission, international development, although costly, must be followed, because if EDF spent €15 billion euro on acquisitions, its rivals would spend €70 billion. The commission recommends a European strategy, an international presence, albeit focussed, and a larger drive to supply gas.

The most significant problem (in May, 2004) was the rocking of the balance sheet between equity capitals of €19 billion and a €24.5 billion debt (November, 2004), for which it is necessary to add:

And, as of November, 2004, complete commitment will overtop the €35 billion euro, which seems to mean that it is not able to cope with its pension commitments or the dismantling of its nuclear power stations.

2002 was considered a bad year, with a small €481 million net profit. 2003 saw a small increase with a €857 million net profit. In the first quarter of 2004, the net profit rose to about €1.5 billion (up 50% in comparison with the 1st quarter of 2003).

The tariff policy ordered by the company contract of 1997-2000 had imposed a reduction of 14% of tariffs. Today, EDF's tariffs in France are among lowest in the world, which leaves room for maneuver to increase tariffs.

Energy policy

EDF produces its electricity primarily from nuclear power plants

The choice of nuclear technology, as always, was considered peculiar for EDF. Its engineers made France the first country use electricity of nuclear origin as the dominant method of production (78% of French production by 2007).

Nuclear technology produces clean electricity, but with some risks, even if they are controlled better and better. In May, 2004, the then-French Interior Minister (now President) Nicolas Sarkozy reasserted, in front of the French Parliament, the primacy of a nuclear power, much to the relief of labour unions of EDF. On this opportunity, the minister had imitated the famous slogan "We do not have oil, but we have ideas" by declaring: "We do not have oil, we do not have gas, we do not have coal, but we had ideas".

Opinions on reform

Local authorities

In general, the local elected representatives were against the modification of the status of the government-owned firm and expressed it aloud. They fear, particularly those of rural districts, and perhaps justifiably, that after the disappearance of post offices and schools, that of the EDF/GDF, and have held talks, in summary:

They also wonder about the assertion of the principle of the tariff adjustment (a unique tariff on the whole territory and equality of users), because as soon as the sale of electricity becomes readily available, it is subjected to the rule of competition and taken into account the true expenses on every segment of customers. The countryside, sparsely populated, risk being the biggest losers.

They also wonder about the true purpose of the government in this affair, and about the strategical will of partners deprived in the capital of EDF, whilst heavy threats (question of retirement, dismantling of nuclear power stations) tax the true balance sheets of the firm.

The position of the former president of EDF

According to François Roussely the former president of EDF, it is not possible to reconcile low prices and competition in electricity. At any rate where countries privatized electricity, it was rapidly followed by an increase in prices and a certain insecurity about energy, notably owing to speculation on electricity (e.g. Enron).

Distribution network

The electricity network is composed of:

Before 1956, the electricity companies of France did not use a standardised voltage. Between 1956 and 1991, the voltage was standardized, and today the voltage is 230 V on all French territory.

Migration from 220 volts cost the equivalent of €70 per subscriber in the beginning, and €1,000 per subscriber in 1991. Eventually, the old usage of 220 volts in France standardized itself to 230 volts, in accordance with European standard.

Plug-in hybrids and V2G

Further information: Plug-in hybrid and V2G

EDF is offering recharging points and trying the new Toyota Plug-in Hybrid Vehicle in France [4]

The French government kicked in $550M and sponsors partnership by Electricite de France with Renault-Nissan and with PSA Peugeot Citroen [5].

EDF's rivals

Electrabel and Endesa

Apart from the producers and foreign distributors, in France, there are some important companies, which, although their market share is weak with regard to that of EDF, are a significant competition. These are:

Locally controlled or between local councils

Among the other rivals of EDF, one can count a number of municipally governed companies, known under the generic term 'entreprises locales de distribution' ('local businesses of distribution'), who are electricity producers exploiting EDF's network.

The nationalisation of electricity and gas on April 8, 1946, which profoundly changed the French electrical and gas organization, had however acknowledged the right of villages to keep their role in the public distribution of electricity and gas.

In 1946, certain firms, villages or groups of villages, did not accept the proposal of nationalisation and created autonomous state controls (who held the monopoly of distribution, until 2004, in their area). To note, contrary to the initial idea, local controllers of electricity, have had, since 1946, the choice to continue to produce electricity. In fact, their production was rather marginal, except in Rhône-Alpes; having often preferred buying the majority of the electrical power from EDF. With the recent opening of the electricity market, local controllers are considering developing, augmenting and diversifying their own production, (e.g. Ouest Énergie, the subsidiary company of SIEDS) and/or to diversify their sources of supply.

To date, the number of local businesses of distribution is approximately 170 and holds 5% of the distribution of French electrical power in 2,500 villages. Created by local authorities, they serve about 3 million people and represent 7,000 jobs. Around thirty of them - 9 during creation in 1962 - are federated in a national entity known as ANROC [1].

Several departments are not therefore served entirely or partly by EDF, for instance:

The EDF Group

EDF's global presence

EDF is present in Europe, South America, Africa and Asia.

Main partners

Negotiations between EDF and ENEL

In Italy, EDF holds 15% of Italenergiabis (the holding company of control of Edison), but has only 2% of decision rights by proclamation of the Italian government.

Negotiations had taken place in 2004 for the entrance of ENEL on the French market, with freedom to acquire quantities of electricity from EDF, and on the other hand the implementation of buying Edison. Negotiations at this point did not succeed, which forced EDF to buy back, at the beginning of 2005, 3% of its actual partners (Fiat, Carlo Tassara, and from banks) for €606 million, but without recovering decision-making rights.

But negotiations carry on and in February and April 2005, EDF bought back the participation of other majority shareholders, in total, and considering the takeover bid which it will also have to throw on the minority shareholders, EDF will have to disburse more than €14 billion. EDF will then be in a grotesque situation, because detaining 100% of capital, its rights to vote will always be blocked to 2%, as long as France does not open its energy market to foreign competition.

The former president of EDF, François Roussely, had bargained for ENEL a right of 4 MWe so that the Italian firm can gain knowledge of the French market, before buying a participation in the transport system of electricity. But the new president, Pierre Gadonneix, cut short any negotiations. Also, ENEL which was interested in buying 35% of SNET, put up for sale by Collieries of France, was doubled by Gaz de France.

Negotiations take place and since the end of January, the matter is at the level of the Italian and French ministries. These negotiations concern:

The directorate

Statistics (2003 estimate)

On July 8 2005, EDF adopted a new logo. The previous logo had not been modified much since the company's founding, the last and only edit being made in 1987. According to EDF, the former logo featured the tricolours of the French flag and considered it "poorly adapted to unifying group subsidiaries." The new logo is suggestive of a turbine and "embodies the Group's commercial and industrial dynamism." [2]

See also

Sources and references

  1. ↑ 1.0 1.1 1.2 1.3 "Annual Report 2007" (PDF). Électricité de France. Retrieved on 2008-07-11.
  2. ↑ Bennhold, Katrin (21 November 2005). "EDF shares fail to light up market", International Herald Tribune. Retrieved on 2008-07-11. 
  3. ↑ "Shareholding policy". Électricité de France (31 December 2007). Retrieved on 2008-07-11.
  4. ↑ EDF et Toyota annoncent un partenariat technologique en Europe relatif aux véhicules hybrides rechargeables
  5. ↑ http://www.environmentalleader.com/2008/10/13/french-president-gives-evs-hybrids-green-light/
  6. ↑ EDF en Espagne

External links

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