France weighs Peugeot sale to fund EDF

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The French government is weighing up a sale of its stake in Peugeot owner PSA Group to help fund a €3bn aid package for energy group EDF, which is building the controversial Hinkley Point nuclear project in the UK.

People close to the situation have told the Financial Times that the state’s shareholding in the carmaker is a candidate for a sale or partial sale, as part of a wider review of the government’s corporate holdings.

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The government needs to raise billions after promising last month that it would provide three-quarters of the €4bn that EDF is seeking in a capital raising. It has already promised to participate in a €5bn capital raising for Areva, the troubled French nuclear reactor maker.

Through its holding company APE, the government currently owns more than €60bn-worth of assets and has investments in 14 listed French groups and is looking for ways they can be used to raise money.

Selling its PSA Group stake is a possibility because the investment is considered “non strategic”, according to one person close to the situation — although other options are also being considered.

France bought a 14 per cent stake in the Peugeot and Citroën brand owner for €800m in February 2014, as part of a deal to bail out the struggling carmaker. Chinese carmaker Dongfeng bought the same amount.

Since then, the French government has seen the value of its stake nearly double as PSA Group has made remarkable recovery, helped by cost-cutting and a strengthening European automotive market.

Economy minister Emmanuel Macron previously said that the state “will not stay forever in the capital” of PSA Group, and highlighted how successful the operation has been for the state.

But one person close to the situation noted that the Dongfeng stake in PSA Group made a sale or partial sale by the French government more complicated. Its 14 per cent stake was taken, in part, to balance out the influence of the Chinese partner.

Other ways to raise money for the French nuclear industry are already being pursued by the government.

Sales of the airports in Nice and Lyon have already been announced, and two people close to the talks said the government is hoping to raise between €1.5bn and €1.8bn from the two.

Last month, Mr Macron said there would be “other operations” by the state, in addition to the airports deals, to find the €3bn for EDF.

According to some of the people involved, options include a sale of some of the government’s shares in Renault, the carmaker in which it holds a nearly 20 per cent stake. It has not yet disposed of the extra 5 per cent it bought last year, for €1.2bn.

EDF, which has a stretched balance sheet with €37bn in net debt, needs money to pay for a range of costly investments, including the £18bn Hinkley Point nuclear project in the UK.

It also has an estimated €55bn bill in the coming decade just to increase the lifespan of France’s 58 nuclear power stations from 40 years to 50 years.

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