France Will Nationalize Country’s Largest Utility Company Amid Deepening War-Induced Energy Crisis

Topline

The French government said Wednesday that it plans to fully take over its largest electricity provider Electricity de France, a move that shows the long-lasting effects of Russia’s invasion of Ukraine destabilizing Europe’s energy market.

Key Facts

French Prime Minister Elisabeth Borne told lawmakers of the plan for the government to “hold 100% of the capital of EDF” on Wednesday, enabling the federal government to take full control of the company and avoid answering to investors as profits dwindle.

Borne said the “colossal challenges ahead” posed by the “consequences of the war” led the government to make the decision.

Previously, the French government held 84% of the company, and other large French firms are at least partially nationalized, including automaker Renault, which is 15% owned by the state.

Shares of EDF rose 14.5% in trading following the announcement as investors signal they expect the government to pay a premium for the outstanding stake.

Key Background

EDF is the sixth largest publicly traded company in France and the 119th largest public company in the world, according to Forbes’ rankings of the 2,000 largest public companies globally released in May, calculated by looking at companies’ assets, market value, profits and sales. EDF has struggled financially recently, exacerbated by the French government capping the prices EDF can charge, forcing the company to take an $8.5 billion loss. The nationalization of EDF comes as the European Union feels the effects of its partial bans on Russian energy. Russia is the largest supplier of energy products to the EU, accounting for 62% of crude oil imports and 25% of natural gas imports to the bloc in 2021.

Tangent

Russian energy companies have also struggled in the aftermath of invasion. Gazprom, a gas and oil giant majority controlled by the state and the country’s largest public company, said last Thursday it wouldn’t pay dividends for the first time in 1998, citing the worsening economic conditions in Russia from its economic isolation from Europe. Gazprom shares fell 29.8% on the day of the dividends announcement, and have fallen a further 6.5% since.

Further Reading

Shares Of Russia’s Largest Public Company Gazprom Tank 30% (Forbes)

​​EU reveals its plans to stop using Russian gas (BBC)