Related Articles
Forward article link
Share PDF with colleagues

France opening the equity of EdF and GdF

THE COUNTRY has taken an important step towards the liberalisation of its energy market by clearing the way to the part-privatisation of its two state-owned utilities, Electricité de France (EdF) and Gaz de France (GdF).

A law passed by parliament in late July changes the status of EdF and GdF, turning them from the industrial and commercial public enterprises set up 58 years ago into ordinary commercial companies. After approval by the constitutional council, the law should be on the statute books by the end of September. Their new status will free the two utilities from the special principle that limits EdF to the production, transport and sale of electricity and limits GdF to gas operations, allowing them to compete with each other in France as well as abroad.

The law also transposes parts of the new European Union (EU) electricity and gas directives, which should have been adopted before 1 July, the date on which the European legislation became official. As a reprimand to France and the other laggard countries yet to adopt the law, the European Commission has sent notification that infringement proceedings have been opened. This does not worry Paris, as its law containing the required transposition will be in effect in early autumn.

Because of very strong opposition from the electricity and gas trade unions, which feared losing the advantages enjoyed by their members, the government had to limit the scope of its intended changes. The economy minister, Nicolas Sarkozy, who said at the outset that everything was negotiable except the status change, made substantial concessions on a range of subjects in discussions with the unions. The government has committed itself to maintaining the public-service functions of the two utilities and promises they will not be privatised, referring to its intended part-privatisation as ?opening the equity? of the two companies.

The main concession will force the government to retain larger state interests in the two utilities than it would have liked. The final law sets the state?s share as ?at least 70%?, instead of ?at least 50%? prescribed in the original draft. If it wants to reduce its holdings in the future, another law will be needed. In addition, 15% of the 30% available to potential investors will be reserved for the employees of EdF and GdF.

Part-privatisation will not come rapidly after the law is enacted. Sarkozy also promised the unions he will to set up committees of legislators, experts, customers and employee representatives to give their opinion on the financial needs of the two utilities before any decision to open their equity to outside investors. This will be done in the autumn and could provide a new opportunity to challenge the move towards part-privatisation.

Also in this section
Pemex debt strategy at risk of unravelling
30 July 2020
The Mexican firm had made some progress arresting its hefty debt pile, but the economic downturn and government obsession with upstream targets has started to take its toll
US domestic M&A sent reeling
28 July 2020
Deal-making across the oil and gas patch has slowed to a crawl despite a swathe of potential devalued assets and strained companies eager to divest
Oil firms ready to pick up the infrastructure divestment pace
13 July 2020
Pipelines, storage facilities and processing plants could replace non-advantaged production as prime candidates