[Business & Issues] Why France's EDF Halted the Czech Nuclear Contract and Is Willing to Go to Court

EDF Desperate to Secure Czech Nuclear Project
Czech Government Expresses Discontent Over Injunction Request

A panoramic view of the Dukovany Nuclear Power Plant in the Czech Republic, where Korea Hydro & Nuclear Power (KHNP) has secured a contract for new nuclear power plant construction. Photo by AP Yonhap News

Attention is focused on the background behind ?lectricit? de France (EDF) taking legal action to block Korea Hydro & Nuclear Power (KHNP)'s nuclear power plant export contract in the Czech Republic. As the only nuclear power company in Europe and one of the world's largest power companies, EDF's move to block the contract despite opposition from the Czech government is widely seen as an inevitable choice to prevent further damage to its credibility. The prevailing analysis is that, with EDF's credibility already significantly undermined due to prolonged delays in its nuclear power plant projects, the failure to win the Czech nuclear project heightened a sense of crisis that the company's future nuclear export prospects could be completely shut down.

EDF notorious for construction delays and cost overruns..."If we lose the Czech project, we can't win future contracts"

AFP Yonhap News

Since being eliminated from the Czech nuclear project in July last year, EDF has continuously interfered with the final contract negotiations between KHNP and Czech Power Company (CEZ). EDF joined forces with Westinghouse of the United States, which was also eliminated from the Czech project, and filed a complaint with the Czech Antimonopoly Office (UOHS), claiming that CEZ did not properly follow the selection procedures. When the UOHS dismissed the complaint, EDF went further and filed for an injunction in the Czech courts.

EDF's desperate efforts to secure the Czech nuclear project stem from concerns over further loss of credibility and the risk of losing its dominance in the European nuclear market. For EDF, winning the Czech project would have been its first overseas contract since securing the Hinkley Point C project in the UK in 2016. EDF suffered significant losses when it lost the bid for the Baltic Sea power plant in Poland to Westinghouse in 2022, and the company feared that if it lost the Czech project to Korea as well, it would likely lose other future projects.

EDF's credibility has plummeted due to long-standing construction delays and soaring costs, not only in its overseas projects but also in domestic French nuclear projects. For example, construction of France's Flamanville Unit 3 began in 2007 and was originally scheduled for completion in 2012, but was only finished in September 2024. The construction period was extended by 12 years, and the cost ballooned from 3.3 billion euros (about 5.2 trillion won) to 13.2 billion euros (about 20.85 trillion won), an increase of more than fourfold.

The Hinkley Point C nuclear power project in the UK is also facing serious difficulties. Construction began in 2017 with a target completion date of this year, but completion has now been delayed until 2031. During the delay, the prices of raw materials and labor have soared. The construction cost has nearly doubled from the original estimate of 26 billion pounds (about 48.45 trillion won) to 46 billion pounds (about 85.72 trillion won).

EDF renationalized after Ukraine war...Debt exceeds 85 trillion won

The construction site of the Hinkley Point C nuclear power plant in the UK, contracted by ?lectricit? de France (EDF) in 2017. The original completion target was 2025, but controversy has arisen as the completion period has recently been delayed until 2031. From the official website of EDF France

The main reasons for EDF's construction delays are a combination of factors, including sharply increased deficits and debt following the war in Ukraine, and the suspension of privatization policies. According to Le Monde, EDF suffered massive losses due to the French government's electricity price cap imposed after the outbreak of the war in Ukraine in 2022. In 2022 alone, EDF recorded a net loss of 17.9 billion euros (about 28.3 trillion won), the largest in its history.

As the risk of EDF's bankruptcy grew, all stages of privatization, which had been gradually pursued since 2005, were canceled. EDF was originally established in 1946 by the French government through the merger of existing private electricity companies into a large state-owned enterprise. In 2005, the French government held 84% of EDF's shares and opened 16% to the private market, pursuing limited privatization. However, in June 2023, the French government invested 5 billion francs (about 8.5 trillion won) to reacquire all private shares, fully renationalizing EDF.

Currently, EDF is gradually reducing its losses with the support of the French government. The company achieved a net profit of 10 billion euros in 2023 and 13.2 billion euros last year. However, due to its massive debt of 54 billion euros (about 85.35 trillion won), EDF is reportedly facing difficulties in attracting investors and securing funding for new construction projects.

Czech government pre-approves KHNP contract..."If construction is delayed, we will claim damages from EDF"

Transmission tower located in the Bilina region of the Czech Republic and the logo of Czech Power Company (CEZ). Photo by Reuters Yonhap News

In response to EDF's injunction request, the Czech government expressed its dissatisfaction and pre-approved the contract with KHNP even before the court's decision. By pre-approving the nuclear power plant contract with KHNP, the government made it clear it would expedite the signing process as soon as the court ruling is issued. On May 7 (local time), Czech Prime Minister Petr Fiala stated at a press conference, "We are prepared to ensure that the signing takes place immediately once the court allows the contract, so that the process can proceed without delay."

If the court rules that there were no procedural issues in the selection process, EDF may have to face a lawsuit for damages for interfering with the contract. Daniel Benes, CEO of Czech Power Company, stated, "If the start of construction is delayed, we will seek compensation from EDF," emphasizing, "Even if we lose the case, we will not sign the contract proposed by EDF."