Tuesday 26 April 2016 9:47 am

EDF's Hinkley could be threatened by EU competition law

France's plan to give struggling state-owned utility giant EDF more financial leeway could be illegal under EU competition rules.

Two environmental groups commissioned a legal opinion on the French government's proposed package of financial support for EDF, which they say is likely to have major implications for the Hinkley Point C nuclear power plant project in Somerset.

Read More: France still "very committed" to Hinkley Point

EDF delayed its final investment decision on the £18bn project yet again last week. There are concerns over whether the utility giant's stretched balance sheet will be able to absorb the huge costs associated with Hinkley.

The legal opinion by Monckton Chambers said the French government's reported refinancing plans for EDF could constitute state aid and require approval by the European Commission. The investigation would take around a year and even then, approval is unlikely to be granted, they added.

"The financial support most frequently reported to be in the proposal is that, as an 85 per cent shareholder of EDF, the French government would accept dividends in the form of shares rather than cash," according to the statement by green energy company Ecotricity and Greenpeace.

"The legal opinion points out that such a move, as well as giving a capital injection to the struggling company, would constitute state aid. A private investor with an equivalent shareholding looking to make a normal return would not agree to this."

Read more: Delays to EDF's Hinkley Point C shows UK energy policy must move away from nuclear power

"The French government’s repeated declarations that they will ‘do whatever is needed’ to ensure Hinkley goes ahead could in itself amount to state aid, given that EDF’s competitors have not received a similar guarantee."

The Hinkley project was first announced in October 2013 but has stalled as EDF has sought to find partners and financing. Last year, the company secured a deal with China's General Nuclear Power Corporation, which will pay a third of the cost in return for a 33.5 per cent stake.