€1bn EDF loan lays the groundwork for nuclear green bond

IFR 2461 - 26 Nov 2022 - 02 Dec 2022
3 min read
Tessa Walsh

A €1bn loan to EDF is the first green loan to be earmarked for the nuclear power industry and shows the increasing renaissance of the nuclear industry as a source of clean energy and energy security.

The bilateral green loan from Credit Agricole will finance the maintenance of EDF’s power plants in France. Outages at EDF’s 56-strong fleet of reactors has severely hit production this year and spiralling financial problems prompted the French government to announce plans in July to renationalise the company.

France is buying the 16% of EDF’s capital that it does not already own for an estimated €9.7bn.

The green loan will help fund the "Grand Carenage", a major industrial programme led by EDF that aims to improve national energy security and extend the operating life of reactors beyond 40 years after a summer of shutdowns and strike action.

EDF said that the green loan is the first for the nuclear industry worldwide as previous ESG-labelled deals for the sector have been in green bond format. In November 2021 Canadian firm Bruce Power issued the first green bond related to nuclear power and that deal was followed by a similar one from Ontario Power Generation in July.

EDF's loan could also pave the way for Europe’s first nuclear green bond. Credit Agricole assisted EDF in incorporating nuclear power in its green bond framework in July following its inclusion in the EU Taxonomy.

EDF is a prolific ESG issuer. It issued its first green bonds under the new framework in October, printing €1.25bn of 12-year green bonds as part of a €3bn senior multi-tranche issue.

A green bond with a nuclear use of proceeds could be on the cards post-nationalisation.

“EDF is saying to the market that it is ready to issue, so we had also a number of discussions with investors about what they are ready for. Even though it’s a loan that has been issued for the moment, we have seen how the landscape stands in Europe,” said Tanguy Claquin, head of sustainable banking at Credit Agricole.

UK nuclear power plant operator Sizewell C is also looking at ESG-labelled debt in early 2023 to fund part of the £15bn cost of the UK’s new-generation nuclear reactor and is considering green bonds as well as social or sustainable bonds.

New reactors

EDF is bracing for a hit of around €32bn to its full-year core earnings from lower production, and the company first has to stabilise its production and financing before gearing up to invest in expensive new reactors that remain controversial due to concerns about nuclear waste.

France is planning to build at least six reactors in the coming decades at an estimated cost of €50bn. The UK government has also commissioned EDF to build up to eight reactors by 2050 with up to 24GW capacity, many of which will be small modular reactors that could also attract ESG financing.

“Despite the controversy, the market is moving to a rational and balanced way of financing different technology. Why shouldn’t small modular reactors or other technologies be financed by sustainable finance instruments and in the green market? I think we’re clearly moving in that direction,” Claquin said.