French government plan to subsidise EDF could be illegal warn leading barristers
Greenpeace and Ecotricity have today released a legal opinion on the French government’s proposed package of financial support for EDF. It is likely to have major implications for the plan to build a new nuclear power plant at Hinkley Point.
The opinion will cause further disquiet amongst EDF board members at the financially troubled company on the day that the French government’s proposal will be presented to the company.
The legal opinion is given by Jon Turner QC, Ben Rayment and Julian Gregory, three eminent competition and EU law barristers from Monckton Chambers.
It sets out how the French government’s reported refinancing plans for EDF are likely to be illegal under EU law unless and until they are approved by the European Commission.
The European Commission’s investigation of state aid takes around a year, and it is doubtful that approval would be given.
The UK government has already given heavy support to the project, which was only approved after being scaled back. The Commission’s existing approval is itself being challenged in the European Courts.
If EDF’s board agreed to proceed with the Hinkley project without fresh Commission approval, EDF could be forced to repay billions of euros. That would jeopardise the stability of the company, not only its involvement in Hinkley.
The financial support most frequently reported to be in the proposal is that, as an 85% shareholder of EDF, the French government would accept dividends in the form of shares rather than cash.
The legal opinion points out that such a move, as well as giving a capital injection to the struggling company, would constitute state aid. A private investor with an equivalent shareholding looking to make a normal return would not agree to this. If the French government were to underpin EDF in this way, in an attempt to shore up the French nuclear industry, this would destroy a level playing field for European energy companies.
The French government’s repeated declarations that they will ‘do whatever is needed’ to ensure Hinkley goes ahead could in itself amount to state aid, given that EDF’s competitors have not received a similar guarantee.
Greenpeace have this morning written to Amber Rudd and George Osborne warning the Ministers not to proceed with the project unless and until the French state support has been notified to and approved by the EU Commission.
John Sauven, Greenpeace UK Executive Director said: “The only way Hinkley can be kept alive is on the life support machine of state aid. EDF, if it is to stay in business, needs a new vision which is not looking backwards. And the UK Government needs to stop penalising the UK renewable energy industry in favour of propping up an ailing state owned nuclear industry in France. Globally, the nuclear market is shrinking year by year overtaken by the huge surge in renewable energy. The UK should be a haven for renewable energy investment given the massive potential for wind, solar and tidal to cost effectively meet our energy needs.”
Ecotricity is Britain’s leading green energy company based in the UK that is considering its legal options given the possibility that EDF may be about to receive preferential and unlawful financial support from the French government.
If the French government does grant State Aid without approval from the European Commissioner, it would be harmful to EDF’s competitors, such as Ecotricity, in the EU electricity market. Greenpeace and Ecotricity have said that they could take action in the French and UK courts and could lodge a complaint at the European Commission which would trigger an investigation.
Dale Vince, Ecotricity founder, said: “It’s time for everyone to realise that we’ve reached the end of the road for Hinkley Point – it’s not going to happen.
“Illegal state aid is one thing, and we’ll work with Greenpeace to challenge that if it happens, but it’s not just financial issues, there are technical problems with Hinkley Point too – EDF are yet to build one of these reactors and their first two attempts are, between them, sixteen years late and billions over budget.
“Our government needs to change its stance on green energy, which powered a quarter of the country last year and could do so much more if the sector received even a fraction of the economic and political support given the nuclear industry.”
Pressure both inside and outside of EDF has been mounting in recent weeks with the company’s Chief Finance Officer, board members, engineers and managers’ unions publicly and privately calling for delays to the controversial project.
A global array of commentators in recent weeks have been vocal in criticising the project. Nigel Wilson, CEO of Legal and General called it ‘a complete waste of money’, Martin Young, an energy analyst at investment bank RBC Capital Markets, said that for EDF to proceed with such a costly plan would be “verging on insanity” and the Chairman of the Energy and Climate Change Committee, Angus McNeil questioned the wisdom of the project during a parliamentary hearing.
For more information or interviews, please call Kate Blagojevic on 07801 212 959 / 020 7 865 8114 / 020 7865 8255
Ecotricity have issued a press release on this story, for interviews with Ecotricity, please call Max Boon on (01453) 761318 or email email@example.com
The legal opinion has been drafted by Jon Turner QC, Ben Rayment, and Julian Gregory at Monckton Chambers instructed by Harrison Grant solicitors http://www.greenpeace.org.uk/sites/files/gpuk/hinkley-legal-advice-19-april-2016.pdf
According to Reuters in February 2016, Bernard Levy, EDF CEO said the state – which owns 85 percent of EDF – would take its dividend for 2015 in shares, which would leave 1.8 billion euros worth of cash in EDF.
He declined to comment on a possible capital increase. “The share dividend is a de facto capital increase,” he said.
According to the Guardian, France’s economy minister, Emmanuel Macron, said it would be a mistake for the 85% state-owned company not to build a new Hinkley Point C power plant in Somerset and he would ensure it happened.
“If there is a need to recapitalise (EDF), we will,” he said during a visit to a nuclear power station at Civaux in midwestern France. “If there needs to be a further waiver of dividends (from EDF to government), we will.”