EDF and GDF, the giant former monopolies, were slated for part-privatization at the end of 2003. However, the prospect of labor unrest, due to vehement opposition from the unions, has led to yet another postponement. Both companies need to come up with a Plan B, because simply waiting around for another year is not an option.
Following the victory of France's political right in this year's presidential and parliamentary elections, it was widely assumed that the French government finally had a strong enough mandate to restructure and part-privatize the country's unwieldy electricity and gas industries. This would be in anticipation of fully opening the French industrial and commercial (I&C) energy market to competition.
Both companies (especially EDF) have come under increasing pressure from the European Commission because their state ownership is seen to confer an unfair advantage in Europe's liberalized and liberalizing energy markets. In particular, the state guarantees that EDF and GDF enjoy make it cheaper for them to service commercial debt compared with privately owned rivals.
Over the years, EDF received substantial tax concessions from the French government which, the EC claims, amounted to unfair subsidies which must now be paid back with interest, totaling E1 billion. The state's generous contribution to the companies' pension schemes is also a bone of contention.
The proposed privatization has strong support from the companies' management, not least because the status quo hampers their ability to compete both internationally and in France. The Italian government barred EDF from exercising management rights over Edison, the country's second-largest power company, which EDF part-owns. In France itself, EDF and GDF are legally prevented from crossing over into gas and electricity supply, respectively, whereas their major rivals are increasingly pursuing multi-utility strategies.
France's trade unions rightly fear widespread redundancies and less generous pension arrangements, and have threatened to wreck any attempt at privatization through nationwide strikes. Clearly, the present right-wing government has no more appetite for confrontation than its socialist predecessor.
Nevertheless, the management will need to implement as many changes as possible under the current ownership structure, starting with trimming the fat and giving up government assistance in return for a relaxation of statutory restrictions on the companies' operations. That way, in a year's time the unions may find that there isn't much left for them that is worth protesting about.