Saturday, 27 June 2020
EDF sanctioned by French Regulators for not coming clean to investors over Hinkley C
The chickens are coming home to roost for EDF for their questionable decision to go ahead with building Hinkley C - a decision they took despite the lack of certainty over whether they would get enough backing from the British Government. Originally EDF was publicised as being offered UK Treasury loan guarantees that had been widely touted as a vital basis for building Hinkley C. But now the French Financial Markets Regulator has sanctioned EDF for not flagging up how conditional such loan guarantees were. These loan guarantees have never materialised.
Essentially, EDF is now continuing to build Hinkley C using money borrowed on its own balance sheets - borrowings which are much more costly than UK Government backed guarantees and which reduce its own (EDF) profitability. The Finance Officer of EDF actually resigned at the time EDF decided to go ahead with building Hinkley C.
There is a commentary on the French Financial Market Regulator's decision at Bloomberg:
The British Treasury wanted to see that EDF could demonstrate the completion of its Flamanville EPR reactor (the same design as Hinkley C) by the end of 2020. But this has long since failed to be likely to happen. No Treasury loans should have equalled no construction of Hinkley C. But instead the construction has gone ahead. Did the EDF management expect the French Govenrment to bail out EDF? About a sixth of EDF's shares are owned privately, the rest being held by the French Government. The French Government has been pumping money into EDF, raising the spectacle that, in effect, French taxpayers are paying for a nuclear power station in Britain!
I discused the crisis facing EDF in an earlier blog post:
Of course all this is happening at the same time when we are being asked to believe that the next EPR (at Sizewell C) is going to be delivered at low cost to the consumer if the risk of building the plant is transferred from EDF to the British taxpayer and consumer! This is the so-called RAB mechanism, something that could well just turn out to be an almost unlimited cash facility for EDF to park their financial black hole in the centre of British finances (as well as those of the French).
Will we ever learn?