EDF cut off from French state in 2004

BRUSSELS, Dec 15 (AFP) – French Finance Minister Francis Mer has written to the European Commission pledging to end state guarantees for the state-owned EDF power utility by the end of next year, EU sources said Monday.

In Paris, EDF declined to comment on the matter.

The EU executive said last month that it is preparing to ask Electricite de France (EDF) to repay EUR 888 million (USD 1.064 billion) received in tax breaks from the French state.

EDF, the once state monopoly supplying France with electricity, is being prepared for extension of competition in France.

Earlier this month it said it plans to hold on to 80 percent of its customers when the French market is opened up and also plans to account for 15 percent of the European market.

The European Commission is to conclude Tuesday its investigation into state aid at EDF, demanding that EUR 888 million in tax advantages be reimbursed.The commission is also to rule on an unlimited state-guarantee, which it says allows EDF to finance itself on capital markets under more favorable terms than its competitors.

State-owned companies often obtain lower interest rates on bond markets than privately owned firms because they are considered to bear less risk.

The commission has said that it doubted such a guarantee was necessary for activities not covered by public service obligations, particularly regarding the production and distribution of electricity outside France and on energy markets.

Although Paris contests the amount it is supposed to reimburse, France is likely to be more flexible about the guarantee because it has proposed reforms resolving the problem.

A source said that the EUR 888 million fine could come to EUR 1.2 billion when interest was included.

EDF has long come under fire from other EU governments for benefitting from a near monopoly in France, while buying assets in deregulated markets elsewhere in the EU.

Subject: France news