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French industry to be impacted by EDF's new strategy

French industry to be impacted by EDF's new strategy

Bernard Fontana is France's nominee for the position of head of the state nuclear company EDF. If he were to get the job, his first task would be to end months of heated discussions with the French industry about the price of power supply on a long-term basis.

According to a government official and media reports, a new system of French electricity sales for heavy industry will be implemented next year. The current CEO Luc Remont's job was at stake due to the inability to progress the issue.

EDF's expensive offers have attracted very few companies. This raises the risk that the utility, as well as the biggest companies in the country, will be forced to buy and sell at market prices with no long-term vision.

Paris' frustration at EDF’s inability to reach new long-term agreements with businesses has grown as it tries to support an industry that is already suffering from high energy prices.

The company's purpose has also been a topic of debate, with former and current officials in the industry calling for it serve a more public role.

The office of President Emmanuel Macron announced unexpectedly on Friday that Fontana had been asked to replace Luc Remont whose term expires in the summer.

Benoit Bazin had criticized EDF, the chief executive of Saint Gobain Construction Materials, in a press interview a day earlier for failing to fulfill its "historic partnership" (partnership with industry)

The core question is: is EDF a company owned by the public that sells at cost, or is it an independent company that makes a profit? Emeric de Vigan, CEO of Paris-based energy consulting firm 42 Advisors, stated that the core issue is: Is EDF a public company which should sell at cost or a commercial company which should make a profit?

EDF has declined to comment about the leadership change and does not reveal its production costs.

Remont, the man who has been running EDF since 2023 when it was nationalised, stated in Sunday's Le Figaro that he wasn't prepared to run EDF like a government authority.

Tough Talks

Fontana's nomination must be approved in the next few weeks by Parliament. Jean-Philippe Tanguy, a member of the National Rally's parliament, told reporters that his party plans to support Fontana's nomination.

Analysts and industry experts say Fontana will need to lower its offers in order to reach a settlement.

EDF's fleet of nuclear reactors produces around 70% of France's electric power. The new Nuclear Production Allocation Scheme (CAPN), allows EDF to sell electricity at a fixed rate under long-term agreements with large users who represent about 10% of France's total electricity demand.

The company announced that it will open its supply to other companies, despite only having committed a quarter the initial amount targeted by the French government. This further enraged the domestic industry.

Fabrice Alexandre is a representative of the industry lobby Uniden. It represents companies such as Renault and Air Liquide.

He said that the industry is willing to pay a higher price upfront in exchange for security over the long term, but they expect a lower cost. They also want their deals completed before summer.

Fontana must offer prices around 50 euros per Megawatt Hour (MWh) in order to attract industry, according to De Vigan. This is a far cry from the 70 euros and more it had been offering.

De Vigan added that progress in long-term contract negotiation is essential to the construction of major new reactors.

He said that if the old fleet was competitive enough, the demand would increase and a new fleet would be required. (Reporting and editing by Dominique Patton, Hugh Lawson and Hugh Crellin. Additional reporting by Elizabeth Pineau and Gus Trompiz.

(source: Reuters)