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Daily Telegraph: France to tighten its grip on energy

By Ambrose Evans-Pritchard
Last Updated: 1:17am BST 02/05/2007

At rallies of the Socialist faithful, Ségolène Royal has variously proposed the creation of a vast French energy combine under state control, the renationalisation of Électricité de France (EdF), an assault on nuclear power, and a windfall profits tax on the oil group Total.

Whether she actually means to carry out any of these schemes if elected president on Sunday is a question that keeps most of France’s energy bosses awake at night.

Rival Nicolas Sarkozy has his own plans to shake up the sector, orchestrating mega-mergers to stop foreign predators walking away with French prizes.

His advisers are looking at ways to make Total “untouchable”, either by meshing it together with Gaz de France (GdF) into a €155bn (£105bn) giant, or by coupling it with the nuclear group Areva.

The “atomic option” would allow Total to prepare for the post-oil era, gradually using its €12bn profits to build a durable base. Both schemes would put Total on a par with BP, Royal Dutch Shell and Gazprom, safely beyond the reach of takeover gangs.

But it is Ms Royal who is really ruffling feathers, calling for “an exceptional charge on oil companies” to fund alternative energy sources.

She has vowed to “abrogate” a decree giving the go-ahead for the new European Pressurized Reactor (EPR), the next generation of plant needed to keep France at the pinnacle of the world nuclear industry.

This is dangerous political territory in a country where the great majority backs the state’s strategic gamble on nuclear energy – all the more so as alarm grows over global warming.

Ms Royal has already climbed down on plans to mothball ageing sites and cut the share of French electricity generated by nuclear power from 80pc to 50pc.

Whatever happens, France will go seriously green if she wins, igniting eco-shares such as Edf Energies Nouvelles.

To the astonishment of investors, the Socialists have renewed their demands for the state to buy back the 13pc tranche of EdF shares floated with much fanfare in November 2005, when it looked as though France was at last serious about shrinking its bloated public sector (54pc of GDP).

Ms Royal has implicitly endorsed the buy-back idea, proposing a Gallic state champion by merging EdF with Gaz de France (GdF). In the process, she would kill off the moribund deal between Suez and GdF, decried by French unions anyway as a backdoor sell-off of the state gas monopoly.

“This is pure demagoguery: how can the state possibly afford to buy the shares back?” asked Eric Woerth, treasurer for the Sarkozy campaign. EdF shares have risen 70pc since the sale, totalling €14.5bn.

Mr Sarkozy instead plans to sell a further block of EdF stock for €20bn to help slim down France’s ballooning public debt – up from 35pc of GDP in 1990 to 66pc, and on track for 80pc by 2015 without a radical change of course.

Ronan Carr, an economist at Morgan Stanley, said Ms Royal’s grand merger plan clearly breached Brussels competition rules. “I think the EU might have a word or two to say about this,” he said.

Whoever wins on Sunday, French energy will remain a no-go area for foreigners, and Brussels be damned.


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