INTERVIEW: EDF CFO Expects UK Sale To Close In November

French state-controlled power behemoth Electricite de France SA (EDF.FR) expects to finalize the sale of its U.K.-based power grids by November, Chief Financial Officer Thomas Piquemal said Thursday in an interview with Dow Jones Newswires just hours after shareholders for a Hong Kong-based member of the buying consortium approved the deal.

The transaction remains subject to approval by decree of the French finance ministry, as well as European Union antitrust authorization, Piquemal stressed.

A Cheung Kong Infrastructure Holdings Ltd.-led consortium, which includes Cheung Kong Infrastructure Holdings Ltd. (1038.HK), HongKong Electric Holdings Ltd. (0006.HK) and Hong Kong tycoon Li Ka-shing's foundation, has offered EDF GBP5.8 billion for EDF's U.K. electricity distribution networks. Shareholders of China's Hongkong Electric Holdings Ltd. (0006.HK), part of the buying consortium, approved the transaction during a general meeting Thursday, Piquemal said.

If the deal is expected to cut the group's debt, estimated at around EUR45 billion at the end June, by EUR6.8 billion, the true objective "is to respect our commitment towards our equity and bond investors to sell around EUR5 billion worth of assets," Piquemal said.

The company's CFO has no specific debt objective, he said, though he understands the need for shareholders and investors to have a better picture of the group's prospects. To address such a concern and give "more visibility on the company," Piquemal said he was considering disclosing three-year financial objectives when the group releases its 2010 full-year earnings in early 2011, depending on the outcome of pending French electricity market reform.

The bill, which the French Parliament started to discuss at the start of summer, was drafted by the French government under European Commission pressure to address competition issues. It is expected to force EDF, France's sole nuclear power producer, to sell around one quarter of its nuclear-generated power at cost to competitors during a short period, allowing the competitors to develop their own production means.

EDF has argued that the cost for its nuclear-generated power is around EUR42 per megawatt hour, while competitors consider such a price too high and would rather pay EUR35/MWh. This price is sometimes called the "NOME price," an acronym for the proposed law, the Nouvelle Organisation des Marches de l'Electricite.

Piquemal stressed that a NOME price below EUR42/MWh "would be very negative" for the company, while at EUR42/MWh, the impact would be neutral on EDF's accounts, as it would take into account special industrial tariffs under a program that allows companies which opted for liberalized power rates to go back to lower, regulated prices.

As for EDF's investments in the U.S., Piquemal noted that the EUR1.1 billion provision the company booked was due to the deterioration of the economic environment and power and natural gas prices there since EDF acquired half of Constellation Energy Group Inc.'s (CEG) nuclear assets.

The deal came with a put option worth $2 billion that Constellation can exercise anytime until Dec. 31, yet Piquemal cautioned that "Constellation must weigh between a potential immediate profit and the value of its partnership with EDF."

The group is currently conducting studies to build a third-generation nuclear reactor at Calvert Cliffs, Md., but the effort needs a boost from the U.S. Department of Energy. An unfavorable sign from the U.S. department would call EDF's investment rationale there into question, Piquemal said.