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France to force EDF to take €8.4bn hit with energy bill cap

·3-min read
<span>Photograph: Charles Platiau/Reuters</span>
Photograph: Charles Platiau/Reuters

The French government will force EDF, the state energy giant, to take an €8.4bn (£7bn) financial hit to protect households from rocketing energy costs by limiting bill hikes to 4% this year.

The company lost a fifth of its market value on Friday after the French government set out plans to cap rising energy bills, which include forcing EDF to sell electricity generated by its fleet of nuclear reactors to rival home suppliers at well below the current record high market prices.

The move underlines pressure on governments across Europe to help households squeezed by the cost-of-living crisis. The UK chancellor, Rishi Sunak, has been accused of being “missing in action” over soaring energy bills. He has been in talks with MPs and companies to agree a package of measures to soften the blow of the national energy crisis, but no decisions have been made.

In Spain, the government introduced a windfall tax on electricity generators and gas producers that are able to profit from the record market highs to help keep home energy bills low. In Germany, the government has slashed a surcharge on bills used to support renewable energy schemes, which will instead receive extra state subsidies drawn from higher carbon taxes.

EDF also told investors that its nuclear power generation for the year ahead would be about 10% lower than initially expected due technical problems at a handful of its nuclear reactors.

The French government, which faced fierce public protest against fuel price hikes in 2018, has already cut some electricity taxes to help slow the rise in home energy bills at an estimated €8bn cost to the state.

Governments across Europe are under pressure to intervene in the energy market to protect households against an unprecedented surge in wholesale market prices, driven by a global gas supply crunch that has lifted markets to all-time highs.

Under the French government’s new measures, it has kept a tight lid on the regulated price that EDF is allowed to charge for its nuclear electricity, which will rise to €46.2 per megawatt-hour, from €42/MWh, despite a record surge in electricity market prices across Europe in recent months.

EDF said the plan could hit its earnings before interest, tax, depreciation and amortisation by between €7.7bn and €8.4bn based on market prices in December and January. Barbara Pompili, France’s environment minister, said the government planned to help EDF withstand the blow but has offered no details on this.

The nuclear power giant also told investors that its reactors would generate less electricity than expected this year. This is because of a string of faults at five of its nuclear plants which will require downtime to undertake maintenance work. EDF estimates that it will generate 300-330 terawatt-hours this year, down from 330-360 TWh previously.

The company’s share price tumbled from €10.35 at Thursday’s close to €7.92 on Friday morning.

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