France’s top public auditor has said that it would be potentially risky for French firm EDF to continue with the nuclear power project in Hinkley in Britain.
EDF is a state-owned power utility firm whose foreign investments in recent years have proved disappointing.
EDF and its 85% state shareholding should take a close look at the risks associated with the £18bn project to build two nuclear reactors at Hinkley Point in Somerset, said the Cour des Comptes – the French equivalent of the UK’s National Audit Office in a report on EDF’s international strategy.
The financing around the Hinkley Point deal was potentially risky for EDF, the report said. However the report focuses on the 2009-2014 period of business of the company and includes EDF’s October 2013 agreement with the British government. The report however does not include its deal in October 2015 with the Chiese utility CGN to take one third stake.
Given the huge sums that the firm would require to upgrade its ageing French nuclear plants, the auditor advised against EDF’s foreign investment plans stating that the cashflow and high debt of the company has limited its capacity to invest abroad.
“Even though the [Hinkley Point] deal has not been finalised, the complexity of the deal and especially the way it could impact the responsibility of EDF suffice to raise serious questions,” the auditor said.
The warning from the auditor comes after unions warned that the Hinkley project is a risk to EDF’s very survival and days after EDF’s chief financial officer resigned over worries about the firm’s ability to finance the project.
In 2013, EDF had planned to take a minority stake in the Hinkley Point project, but CGN only agreed to take a one-third stake.
This resulted in the company having to bear the burden of two thirds of the project and construct two Areva-designed European Pressurised Reactors (EPR) in Britain. The company is years behind schedule and billions in over budget in the construction of four other EPRs that are under construction in Finland France and China.
“[These delays] make one wonder whether Hinkley Point can respect its deadlines,” the auditor said. EDF would be responsible for the cost is the project runs over budget, added the auditor.
EDF’s focus on nuclear and in foreign investments is acceptable as it is a way to preserve its skill base at home, the auditor said. But it warned that it was acceptable as long as this was not more a defensive than an offensive stance.
EDF needs to build reactors abroad to sustain the French nuclear industry at home but also wants to renew its ageing nuclear plants in a decade from now.
EDF had been slow to invest in energy services and the firm’s renewable energy unit EDF EN had a “marginal” and “peripheral” place within the firm, the auditor also.
Different corporate cultures exist in EDF and its energy services unit Dalkia – which it acquired two years ago and synergies needed to be built.
The auditor said EDF’s rate of return (core earnings over revenue) on foreign projects was just 12% in 2014, compared with 30.6% in France and had been falling since 2009.
(Source:www.theguardian.com)
EDF is a state-owned power utility firm whose foreign investments in recent years have proved disappointing.
EDF and its 85% state shareholding should take a close look at the risks associated with the £18bn project to build two nuclear reactors at Hinkley Point in Somerset, said the Cour des Comptes – the French equivalent of the UK’s National Audit Office in a report on EDF’s international strategy.
The financing around the Hinkley Point deal was potentially risky for EDF, the report said. However the report focuses on the 2009-2014 period of business of the company and includes EDF’s October 2013 agreement with the British government. The report however does not include its deal in October 2015 with the Chiese utility CGN to take one third stake.
Given the huge sums that the firm would require to upgrade its ageing French nuclear plants, the auditor advised against EDF’s foreign investment plans stating that the cashflow and high debt of the company has limited its capacity to invest abroad.
“Even though the [Hinkley Point] deal has not been finalised, the complexity of the deal and especially the way it could impact the responsibility of EDF suffice to raise serious questions,” the auditor said.
The warning from the auditor comes after unions warned that the Hinkley project is a risk to EDF’s very survival and days after EDF’s chief financial officer resigned over worries about the firm’s ability to finance the project.
In 2013, EDF had planned to take a minority stake in the Hinkley Point project, but CGN only agreed to take a one-third stake.
This resulted in the company having to bear the burden of two thirds of the project and construct two Areva-designed European Pressurised Reactors (EPR) in Britain. The company is years behind schedule and billions in over budget in the construction of four other EPRs that are under construction in Finland France and China.
“[These delays] make one wonder whether Hinkley Point can respect its deadlines,” the auditor said. EDF would be responsible for the cost is the project runs over budget, added the auditor.
EDF’s focus on nuclear and in foreign investments is acceptable as it is a way to preserve its skill base at home, the auditor said. But it warned that it was acceptable as long as this was not more a defensive than an offensive stance.
EDF needs to build reactors abroad to sustain the French nuclear industry at home but also wants to renew its ageing nuclear plants in a decade from now.
EDF had been slow to invest in energy services and the firm’s renewable energy unit EDF EN had a “marginal” and “peripheral” place within the firm, the auditor also.
Different corporate cultures exist in EDF and its energy services unit Dalkia – which it acquired two years ago and synergies needed to be built.
The auditor said EDF’s rate of return (core earnings over revenue) on foreign projects was just 12% in 2014, compared with 30.6% in France and had been falling since 2009.
(Source:www.theguardian.com)
