A $3 Billion Nuclear Hangover May be Faced by France’s Next President

Selling off some of the nation’s prized assets to prop up France’s nuclear industry would be one of their first tasks in office for whoever succeeds Francois Hollande as France’s president.

Two government officials with direct knowledge of the matter were quoted in the media saying that compared to the 7.5 billion euros it has said it needs this year to fix the financial problems of Areva SA and Electricite de France SA, the government is as much as 3 billion euros ($3.2 billion) short. While one of the sources claimed that Hollande’s successor must decide how to plug the gap, another sources reportedly said that Hollande he  will try to find an answer before he leaves office in June.

After EDF was weakened by falling European power prices and Areva lost billions on a long-delayed project in Finland, France is preparing to rescue its nuclear industry.

The president has essentially two options. The first, a tall order with the first round of presidential elections just three months away, is to weigh politically sensitive privatizations of holdings in anything from automakers such as Renault SA to the former phone monopoly while the second is to increase the national debt.

“It’s not that simple to raise these funds, either because of market conditions or for strategic or social reasons,” said Senator Maurice Vincent, a member of the ruling Socialist Party who sits on the finance committee. “Half of the holdings are in the depressed energy sector which needs to be bailed out, and a quarter is in the defense sector where you have limited divestment leeway, so that doesn’t leave much wiggle room.”

The French government remains almost 3 billion euros short of the 4.5 billion euros it wants to help its near-bankrupt reactor maker, Areva, complete its restructuring and meet debt repayments this year, even though it has enough in its privatization account for the 3 billion-euro stimulus it plans for EDF this quarter. Including a 500 million euros from Japanese investors, a a 5 billion-euro state-backed bailout was favored by Areva shareholders on Friday in a vote.

In France, the two state-controlled companies were supposed to be leading the charge to export the technology around the world and the country depends on nuclear reactors for about three-quarters of its electricity. And as the best guarantee of energy security and a low-carbon future, they will support the nuclear industry, at least in the medium term, all three leading presidential candidates have said.

A difficult choice between increasing the national debt or the selling stakes in public companies which are valued at a total of about 90 billion euros, will have to be faced by the winner Bottom of Form

of the election runoff due May 7 . The privatization options for the government are constrained by shareholder pacts, politics and the financial circumstances of some of the companies even as the government owns a piece of everything from the postal service to carmakers Renault and PSA Group, manufacturer of Citroen and Peugeot.

Those holdings include 26 percent stake in defense company Thales SA, which is bound by a shareholders’ pact with Dassault Aviation, and an 11 percent stake in aircraft maker Airbus, which can’t be reduced without ceding some control to Germany.

(Adapted from Bloomberg)

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