Beware French reports saying EDF/CEG deal dead
Be careful using reports in the French press to jump to conclusions that EDF Group will scrap plans to invest $4.5 billion into Constellation Energy's nuclear-power business. It may be true that Henri Proglio, CEO designate of EDF, expressed doubts about the state-owned electricity company's U.S. plans. But I wonder if he understands what dumping the Constellation deal would involve.
Several news organizations say Proglio views EDF's agreement to buy half of Constellation's nuclear-electricity business skeptically. The reports emerged after Proglio met in closed session with a parliamentary committee that oversees the state-owned electricity giant. Politicians gave anonymous quotes to the press afterward.
As noted in a previous post, Les Echos states flatly that Proglio "would like... to exit a proposed joint venture with the American Constellation." Le Monde says, "He would prefer to find an exit." A Reuters piece is more nuanced. (These are my {rough!} translations.)
According to a legislator who did not wish to be named, Henri Proglio expressed doubts about EDF's latest acquisitions. "He said that, for England, the deal had to be
completed but that it was too expensive. For the United States [Constellation], he said he wasn't sure that it had to be done," [the legislator said.] Asked if Henri Proglio had suggested that EDF reject the Constellation operation, this legislator replied in the negative.
First, beware of blind quotes. Second, I wonder if Proglio has read the fine print of the Constellation deal. If the $4.5 billion investment in the nuclear venture doesn't go through, Constellation holds an option to unilaterally sell EDF several of its U.S. fossil fuel plants -- mainly dirty coal generators -- for up to $2 billion. Proglio's going to have to spend some cash on Constellation one way or another. Does he really want the coal plants instead of the nuclear stake?
Of course, the nuclear deal may die anyway if Maryland's Public Service Commission rejects it or imposes conditions that Constellation deems too severe. Constellation may be just as happy as EDF to end the proposed expansion of their nuclear partnership. It apparently doesn't need EDF's $4.5 billion any more. With the coming of carbon taxes, it might rather hang onto 100 percent of its nuclear business and jettison the coal plants.
UPDATE: The English-language press weighs in this morning.
The Wall Street Journal:
PARIS (Dow Jones)-- The French government has so far no position on whether state-controlled power company Electricite de France (EDF.FR) should drop its delayed $4.5 billion bid for a stake in U.S.-based nuclear group Constellation Energy Group Inc. (CEG), a French government senior official told Dow Jones Newswires Friday."There has been no decision made yet and so far, the government has no position for now," the person said, under conditions of anonymity.
The Financial Times:
EDF, the French nuclear power operator, faces pressure from the government to abandon its US foray, where regulatory difficulties have delayed a $4.5bn deal with Constellation Energy.The French utility has agreed to buy 49.9 per cent of Constellation's nuclear assets and build four nuclear reactors with the US company.
However, government officials told the Financial Times that a reflection was under way over whether EDF - 84 per cent owned by the French state - should focus on Europe, which would demand heavy investment.
Comments
The French Government wants the deal...which is crucial for AREVA, not for EDF. Proglio is just playing poker...He approved the deal last year as Board member of EDF...Let's see within 2 hours...
Posted by: C | October 30, 2009 9:54 AM
I believe the option is non-contingent. Whether or not the deal goes through EDF could be on the hook for the $2b purchase.
Posted by: Option | October 30, 2009 12:22 PM