The implementation of the agreement, subject to signing of the definitive agreements, will have no impact on Engie's medium-term guidance presented in February 2023
Engie and the Belgian government sign an intermediate agreement that outlines the terms for the extension of the Doel 4 and Tihange 3 nuclear units. (Credit: Burghard Mohren from Pixabay)
On 29 June 2023, an intermediate agreement was signed between Engie and the Belgian government, outlining the terms for the extension of the Doel 4 and Tihange 3 nuclear units. The objective of this agreement is to establish a fair allocation of risks between both parties and to address any uncertainties regarding future modifications to provisions concerning the management of nuclear waste.
The agreement builds upon the non-binding agreement in principle signed on 9 January 2023, and outlines the following terms:
- Both parties commit to exert their best efforts to resume operations of Doel 4 and Tihange 3 nuclear units, aiming for a restart as early as November 2026. Alternatively, if there is effective implementation of announced regulatory relaxations, the restart may be targeted for November 2025. The objective is to enhance the security of energy supply in Belgium.
- A dedicated legal structure will be established, jointly owned by the Belgian State and ENGIE, to govern the extended nuclear units. This arrangement aligns the interests of both parties and ensures the sustainability of their commitments.
- The extension will adopt a business model with a balanced allocation of risks. This will be achieved through a contract for difference mechanism that includes incentives for the industrial operator to achieve favourable technical and economic performance at the plants.
- An agreement has been reached on the fixed amount of future costs associated with the treatment of nuclear waste. This agreement is based on a new scenario defined by ONDRAF, encompassing all of Engie’s nuclear reactors in Belgium, with a total cost of €15bn. The payment of this amount will be made in two instalments: the first instalment, covering categories B and C, will be paid at the closing in the first semester of 2024, while the second payment, pertaining to category A, will be made at the start of the LTO (Long-Term Operations).
Under the agreement, the transfer of all nuclear waste liabilities to the Belgian government results in Engie group no longer being responsible for the future costs associated with waste treatment. These costs, which are reviewed every three years by the Nuclear Provisions Commission (CPN), will now be borne by the government. In exchange for this transfer, Engie group will recognise an increase in its commitments as an expense impacting non-recurring income for the 2023 fiscal year, after adjusting for nuclear provisions. The estimated amount of this expense is approximately €4.5bn before tax. Additionally, the Group foresees a corresponding increase in economic net debt of a similar magnitude.
Upon the expected signing of the definitive agreements by the end of July 2023, the implementation of this agreement is anticipated to have no impact on Engie’s medium-term guidance as presented in February 2023. This applies to various aspects, including net recurring income, credit, investments, and dividend policy. Therefore, the agreement does not alter the company’s projected outlook.
Furthermore, the agreement includes provisions for the removal of restrictions on certain assets owned by Electrabel, an Engie subsidiary.
Engie CEO Catherine MacGregor said: “After several months of intense and constructive dialogue with the Belgian government, we are pleased with the signing of this balanced agreement for both parties.
“It provides ENGIE with the necessary visibility on the total amount related to nuclear waste management and significantly reduces the risks linked to the extension of the two units. This is a new fundamental step towards the extension of Doel 4 and Tihange 3, for which ENGIE is fully and responsibly committed.”