Electricité de France has frozen all spending not related to safety, security or public service in the face of an imminent cash crisis, according to reports in the French media.
Nonetheless EDF is still planning to invest E5 billion in the natural gas sector by 2005, to further its intention of becoming an integrated utility. Media reports also suggest that the French government had put EDF “under surveillance” because of its poor financial results. But neither EDF nor the French government would confirm these reports.
The combination of EDF’s expansion in the last decade and a government freeze on electricity prices has led to a “serious” financial problem, according to EDF’s chief financial officer Jacques Chauvin. Quoted in Le Monde, he said that EDF could only break even if the financial situation in Brazil and Argentina, where they have invested heavily, did not worsen.
Agence France Presse reported that the French ministry of finance had decided to monitor EdF’s finances more closely in the wake of the financial debacle at France Telecom. EDF’s debt stood at E22 billion at the end of 2001. The French government has recently removed the chairmen of two state-owned firms, France Telecom and La Poste.
The contract signed with the previous government covering 2001-2005 called for EDF to seek an alliance with a major gas player in the European market. EDF chairman and ceo Francois Roussely has been pushing an external acquisition drive – the company spent E11 billion of a planned E19 billion to buy European utilities – and repeatedly publicised the need for EDF to raise capital, a clear call for the government to proceed with the planned sale of EDF shares.
But the present government, though in favour of the partial privatisation of EDF, and in any case committed to liberalisation by EU treaty, has indicated that that step must be preceded by a dialogue with labour unions, and the restructuring of the utility and its books according to international corporate standards.
EDF might still post a profit this year, thanks to saving around É200 million on reined-in costs and foreign investment. However, this has done little to assuage the criticism heaped on EDF by right-leaning MPs over its poor accounts. France’s four-month old government plans a huge sell-off of state assets to fund tax cuts and boost future pension funds, forcing EDF to dust down its account ledgers and open them to scrutiny.