PARIS (Reuters) - French state-controlled utility EDF EDF.PA said the government agreed to reimburse it for a 4.9 billion-euro ($6.5 billion)shortfall in renewables subsidies, sending EDF shares 5 percent higher on Monday.
The deal provides for the gradual repayment of the difference between what was collected through a tax paid by consumers and EDF’s green energy production costs, EDF said in a statement.
Since 2007, the state-set tax levy - known as the Public Service Electricity Contribution (CSPE) mechanism - has been insufficient to compensate for the increase in renewable energy costs.
The difference has been borne by EDF, which has booked it as a debt from the state.
“This is a big signal, EDF has convinced the government to finally admit that there was a need for action,” Kepler Capital Markets’ Ingo Becker told Reuters.
He said the cost of lower tariffs for low-income households and renewable energy was borne by consumers in all European countries, but that France had avoided charging consumers the full amount.
EDF said the French state would gradually reimburse the 4.3 billion-euro cumulative deficit as well as the related 600 million financing cost. The 4.9 billion total would be fully repaid by December 31, 2018, it added.
The French finance, budget and environment ministries said in a joint statement that the previous government, by not charging the real cost of renewables to consumers, had burdened EDF with a heavy charge.
“At a time when it needs to invest massively in its production facilities and its networks, this charge was a handicap for EDF,” the ministries said.
The government said a 3 euro per megawatt/hour increase in the CSPE tax from January 1, 2013 would cover the extra cost of renewables and other public charges.
It added that the cost of reimbursing EDF for the shortfall over the past years would be covered by future increases in the CSPE tax.
($1 = 0.7493 euros)
Reporting by Dominique Vidalon, Benjamin Mallet and Geert De Clercq; Writing by Geert De Clercq; Editing by James Regan