France’s top audit body questions feasibility of EDF’s nuclear plans

France’s Cour des Comptes has issued a warning about rising nuclear energy costs. It is urging state-owned utility EDF to reduce its financial risks in international projects.

France’s supreme audit institution, the Cour des Comptes, has released a report on the feasibility of the nuclear plans unveiled by the government in 2022, concluding that the industry is “far from being ready” for the challenge.

The Cour des Comptes said the plan to develop EPR2 nuclear reactors – pressurized water reactors designed by EDF and Framatome – remains unclear.

“The expected profitability of the EPR2 program remains, at this stage, unknown, especially as the financing conditions of this program have still not been determined,” the authors of the report said. “When these conditions will be clear, an additional year or more will be needed to obtain their approval by the European Commission. These delays and uncertainties, which also concern the number of power plants to be built, reduce the visibility that stakeholders in the sector need to engage in industrial projects of this magnitude and obtain financing.”

The report noted that the EPR2 program still lacks a final cost estimate and financing plan, while state-owned energy company EDF remains heavily indebted. The Cour des Comptes recommended withholding a final investment decision until financing is secured.

These precautions aim to prevent cost overruns similar to those seen in EDF’s Olkiluoto EPR project in Finland, the Hinkley Point plant in the United Kingdom, and the Flamanville 3 facility in France.

“EPR reactors operating in China and Finland have experienced multiple technical malfunctions in recent years, with significant financial impacts and damaging consequences for the credibility of the EPR2 program,” said Cour des Comptes. “EDF had to record in its 2023 financial report a depreciation of this asset which reduced its results by €11.5 billion ($11.77 million),” they added referring to the Hinkley Point C project, whose costs rose to GBP 33 billion ($40.6 billion), a 100% increase versus the initial estimated cost.

The court also said that a proposal to expand EDF's Sizewell plant in the United Kingdom could be rejected if the French utility fails to reduce its financial exposure for Hinkley Point C. It warned that the industrial strategy implemented by EDF does not yet guarantee the accountability of stakeholders and noted that the incentives that are essential to the success of the EPR2 program.

“The EDF group’s strategy, which plans to continue promoting nuclear reactors internationally, should no longer make excessive equity commitments or take excessive risks in terms of profitability and operational coordination between the different projects,” the court said, noting that these financial risks may slow down the schedule of EPR2 program in France.

The report concluded that efforts to strengthen the nuclear industry remain inadequate, particularly in rebuilding skills and capacity.