France, Germany and Britain have shot at the energy giants! "Nationalization" of energy companies in Europe?

Source: Global Times

[Global Times special correspondent in France Yu Chaofan Global Times special correspondent in Germany Zhaodong Liuzhi] "France's largest energy company will be completely nationalized. French newspaper Le Figaro reported on July 6 that in the face of the intensifying energy crisis in France after the outbreak of the Russian-Ukrainian conflict, the nationalization of energy companies has become the ultimate choice of the government. Recently, Europe has frequently attacked energy companies, on the one hand, with the intention of strengthening control over the domestic energy market and easing inflationary pressures; On the other hand, it is also seeking to broaden the means and methods of "energy confrontation" with Russia.

France wants to win the "energy war"

On July 6, French Prime Minister Elisabeth Bornet declared in her general policy speech that "to win the battle for energy and production, the government must make strong and radical decisions." The French government plans to hold a 100 percent stake in EDF, which rose in response to a 5 percent drop in its share price just a day earlier.

Borny's statement continues the French government's previous approach to the country's large energy companies. On March 17, French President Emmanuel Macron said that in some areas of economic activity related to sovereignty, "the state should recover its capital."

Born in 1946, EDF was the first national monopoly company established by the French government to engage in the production and transportation of electricity. For a long time, EDF was a business that was fully controlled by the French government. After 2005, with the opening of the market and capital, EDF was listed. The French government currently holds nearly 84% of EDF's shares, individual and institutional shareholders account for 15%, and the remaining 1% is held by employees.

France's BFM TV reported that under the outbreak of the Russian-Ukrainian conflict and the new crown pneumonia epidemic, the soaring energy prices have led to a sharp increase in the cost of power generation, and EDF is estimated to be saddled with a huge debt of 43 billion euros. At the same time, the Group's financial position is expected to come under further pressure as the government requires EDF to start a new nuclear reactor construction program.

Russia's "Kommers" quoted Russian economist Rozhenko as saying on the 6th that in the context of high electricity prices in the European market, EDF found itself falling into a "trap": in order to fulfill the energy supply contract, it not only had to bear nuclear power, but also had to buy energy in the international market at a high price. According to the German Federal Network Agency, Germany exported about 600,000 MWh of electricity to France in June, compared with about 300,000 MWh of electricity imported from France in the same period last year.

Previously, in order to appease the market, EDF announced the launch of a capital increase plan totaling 3.1 billion euros, in which the government, as the majority shareholder, will subscribe for 2.654 billion euros. The analysis believes that the nationalization of EDF will alleviate the market's panic about energy and power supply to some extent. Prime Minister Borne promised that the re-nationalization of EDF would reserve sufficient funds for it.

Frequent introduction of national intervention policies

France has taken a "big step" towards the nationalization of energy companies, and many European countries are rolling out similar measures. The German newspaper Le Monde recently reported that the German Bundestag passed a revised draft of the energy security law in May, which stipulates that the state can take over energy companies in a state of emergency. Under the new regulations, the government can take special measures before Germany's energy supply is threatened.

"The federal government wants to build a protective shield for energy companies," the German magazine Der Spiegel reported on July 4 that the German government is considering financial assistance to avoid the bankruptcy of German gas supplier Uniper. This stems from the new version of the Energy Security Act. In extreme cases, the government provided financial assistance by acquiring shares in the company to avoid bankruptcy of the gas supplier.

In March this year, the British government was disclosed to be preparing to rescue Gazprom Energy, a British energy subsidiary of Gazprom. The company came under pressure after the Outbreak of the Russian-Ukrainian conflict, which had previously been responsible for supplying natural gas to about 20 percent of British companies.

Recently, the European Commission approved a 5 billion euro aid package that will support energy-intensive enterprises in the form of direct funding. The European Commission said the aid would be provided in the form of direct grants and would be open to companies in all sectors, with the exception of credit and financial institutions. Guzman, head of energy consultancy GasVista LLC, believes that the intervention of European governments in the market is just the beginning.

Lin Boqiang, dean of the China Energy Policy Research Institute at Xiamen University, told the Global Times on July 7 that the privatization of energy companies in Europe has brought benefits that corporate efficiency will be improved to a certain extent, but it has also led to uncontrollable energy markets. Strengthening the nationalization of energy enterprises will help avoid the impact of high energy prices on the downstream economy, "China's energy companies are mostly state-owned enterprises, and when energy costs are high, they must bear social responsibility." However, Lin Boqiang also said that at present, many European countries have begun to nationalize energy enterprises, which can only make inflation more controllable and alleviate the energy cost crisis, but it cannot solve the contradiction of energy shortage.

Preparing for an "energy confrontation" with Russia

The Financial Times reported this week that European electricity prices have reached their highest level on record. Next year's delivery of German baseload electricity (the European benchmark price) rose to 325 euros per megawatt hour, and since the beginning of this year, the equivalent electricity contract price in France has doubled to 366 euros per megawatt hour.

Despite high prices in the European gas market, the increase is not directly passed on to consumers. Most European countries have adopted an approval mechanism, and the pricing of consumer fees by energy companies is subject to the approval of the competent government authorities. Moreover, many energy consumers have long-term contracts with energy companies, during which price adjustments are limited. At the same time, in order to control energy prices, European countries generally take measures such as direct subsidies and price caps to consumers.

Despite this, European consumers have been "stinging" by rising energy prices since 2022. Germany's "Bild" quoted data from the German price survey website check24 website on July 6, saying that the price of natural gas heating for an ordinary household in 2021 is 1290 euros, and this year it is as high as 2752 euros.

At the same time, behind the promotion of "nationalization" of energy companies in many European countries, it is also intended to enrich the means of "energy confrontation" with Russia. In early April, German Deputy Chancellor and Minister of Economy and Climate Protection Harbeck took a "takeover" of Gazprom's German subsidiary. The company is now under the trust of the Federal Networks Agency, which is responsible for power, energy, railroad and communications networks. The Russian side stressed that any such act would be contrary to international law.

Austria's "Vienna Daily" pointed out on the 6th that Austria's energy regulations also stipulate that the state can take special measures in times of crisis to expropriate domestic and foreign energy companies in Austria. EU news site EURATIV says many European countries, including Germany, are considering the possibility of confiscating, nationalizing or otherwise expropriating energy infrastructure owned by Russian affiliates.