EDF announces the allocation of 50% of RTE shares to the dedicated assets portfolio built to cover future nuclear expenses
On 31 December 2010, EDF Group allocated 50% of the RTE shares to its dedicated assets portfolio set aside to cover future costs related to the decommissioning costs of nuclear plants and the downstream fuel cycle. This decision, approved by EDF's Board of Directors on 14 December 2010, received the necessary administrative approvals(1) . As a result of this decision, RTE remains wholly-owned by EDF.
The financial impact of this allocation is positive as it prevents the Group from having to provide for cash allocations to the dedicated asset portfolio for an amount with a current cumulative value of about EUR 2.3 billion by 2016, equivalent to 50% of RTE's net book value in EDF's consolidated accounts at the end of 2010.
At this juncture, the French State has wished to proceed with a concomitant change in RTE governance at 31 December 2010, which translates in an increased number of State representatives on RTE Supervisory Board, which now stands at 4, i.e. the same number as for EDF representatives and RTE employees. As it no longer holds the majority on RTE's Supervisory Board, EDF Group will no longer account for RTE by the full consolidation method, but instead by the equity method. This change in consolidation method, effective as of 31 December 2010, will in particular lead to the deconsolidation of RTE's net financial debt as from fiscal year 2010, thus improving EDF Group's net debt to EBITDA ratio. As from fiscal year 2011, it will lead, among other things, to the deconsolidation of RTE's sales and EBITDA in EDF Group's accounts. However, this will have no impact on RTE's contribution to EDF Group's net income.
The dedicated assets portfolio, which has been gradually built up since 2000, totalled EUR 12.4 billion at 30 June 2010. The "NOME Act" (French New Electricity Market Organisation) henceforth sets the deadline for building this portfolio in the amount of the corresponding provision at June 2016. Thanks to the allocation of 50% of the RTE shares, EDF Group has diversified its dedicated assets portfolio and reduced its volatility. Infrastructure assets such as RTE offer returns that are both predictable and have low correlation with other financial asset classes such as equities or bonds.
(1) The ministerial order of February 2007 related to the securing of funding for nuclear expenses, which governs in particular the composition of these assets, was amended by the ministerial order of 29 December 2010, which entered into force on 31 December 2010.
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