French state-owned monopoly Electricité de France is suffering losses in South America, where it owns 90 per cent of Edenor SA, Buenos Aires. It will take a one time charge of E500 million (Euros) this year. It will also allow E250 million to cover possible losses in its Brazilian business. Last year EDF’s Argentinian unit lost E873 m when the government devalued the currency and converted dollar loans into pesos to try and boost the economy.
Things are not going too well in Europe either. The European Commission is demanding the end of tax breaks and unlimited state guarantees for EDF, and the return of up to E900 million in aid, following EU monopoly commission investigations of a 1997 tax break handed over by the French government. The move follows increasing anger and concern among France’s EU neighbours, and criticism from EC competition commissioner Mario Monti, over unfair competition – EDF has been using its unique position to expand across Europe, buying up supply and distribution rivals in Italy, the UK, Germany Spain and Belgium and creating Europe’s biggest power company. Meanwhle, access to the French market has been limited to the minimum allowed under European law. The timing is unfortunate for the government, which is working towards selling a stake in EDF. It will be Europe’s biggest ever initial share sale.
The French government has reacted angrily to the move, denying that it gave unfair support to EDF and promising to challenge the EC. Two French European commissioners have already refused to back the move. Paris has a month to respond. If it refuses to end the guarantees, Brussels will open a formal probe.
