Letter from Colette Neuville (Adam) to AMF, Company News

Mr. Robert Ofele
The president

Financial Markets Department
17 Exchange Square
75082 PARIS Cedex 02

CC: EDF directors
Mr. Director General of APE

Chartres, 21 July 2022

Mr. President,

In her general policy statement, the Prime Minister reaffirmed the intention of the state to own 100% of EDF’s capital, thereby effecting the de facto nationalization of the company through market operations. Thus, on July 19, the state announced its intention to submit a simplified takeover bid for EDF shares to be delisted at a price of 12 euros per share and 15.64 euros per OCEANE (bonds convertible into shares).

We can only approve the decision to “renationalize” which will enable the State to have all the means, both legal and financial, necessary for the performance of its missions of general interest, and “ strengthen our ability to implement ambitious and important projects for our energy future as soon as possible.” This decision will also have a great advantage, as it will put an end to the situation of conflict of interest in which the state has found itself since the discovery of capital, the common interests for which it is responsible, force it to use its power as a majority shareholder to impose on the company decisions that undermine the public interest and shareholder interests.

On the other hand, a draft public offer followed by a buyout at a price of 12 euros is unacceptable, since it does not comply with the principle of fairness, on which the law of public offers is based, and even more so the buyout principle. . Therefore, the offeror must submit to the AIF an opinion on fairness issued by an independent expert when submitting the offer.

In its current form, justice is not observed for the following reasons:

one) ” Nemo auditur propriam turpitudinem allegans” the old saying of Roman law has already been said. No one can take advantage of their own meanness.

It would be unfair for a state initiating a Buyout Offer to keep the current value of the company as the basis for compensation to shareholders, while the loss in value of EDF is due to greater participation in decisions. it demanded and which, however useful or necessary from the point of view of the general interest, were detrimental to the shareholders.

A number of these decisions have also been the subject of complaints from employee shareholders:

– sale at a loss of at least a quarter of nuclear power generation under the AREHN mechanism;

– restriction of tariffs;

– modernization of AREHN (which was the subject of a complaint to the European Commission and an appeal to the Council of State);

– political closure of Fessenheim

– legal takeover of Photowatt and participation in the rescue of AREVA, which is on the verge of bankruptcy.

– payment of dividends with negative cash flows: in this regard, the Accounts Chamber notes in two of its reports (July 2012 and January 2017) “ EDF’s dividend policy did not take sufficient account of the company’s medium-term funding needs”, “so EDF paid its shareholders for the 2010 financial year more than double its annual profit by buying back equity at the request of shareholders” (i.e. hypermajority state) “In 2014, after paying a dividend of 2.14 billion euros, EDF’s cash flow was negative by 4 billion euros, which means that the company was forced to run into debt in order to pay this dividend”

Other decisions, such as those regarding the Hinckley Point construction site, which led to the CFO’s resignation and his case being heard by the National Assembly, also weighed heavily on the share price.

Without assessing the usefulness or even the necessity of these decisions in relation to the general interests, it is clear that they are to a very large extent the cause of the loss of the company’s value and that it would be contrary to elementary justice for the state to be able, on the basis of the company’s value depreciated in this way, to compensate minority shareholders, whom it decided to expropriate, moreover, at the bottom of the market, in the midst of an energy crisis.

2) Fairness, in contrast, requires that a return to nationalization result in a fictitious transaction for shareholders and, therefore, that the exit of minority stakes be at the IPO price, adjusted for dividends received.

Having decided to return 100% of the capital, the state de facto admits that the discovery of capital was a mistake. Fairness requires that the shareholders who are collateral victims of this mistake can return to their former position without harming themselves and that their transition to EDF capital ends in a black operation. This is far from the case if the exit price is set based on current value, whether by reference to the average market price of the last 60 days or the last 12 months, as is done in the July 19 press release. , or evaluation by an expert according to the usual criteria of a multi-criteria method.

It should be noted in this connection that the usual criteria appear to be inapplicable in the present case. en due to significant uncertainties affecting all factors that need to be taken into account (price dynamics, costs, project completion dates, interest rates, lack of comparable transactions, etc.). Any estimate based on such uncertain data would only lead to ranges so wide that they would not make sense.

On the other hand, the law leaves the experts complete freedom to choose the criteria that seem most appropriate to them, nothing prevents the listing price (32 euros) from being kept as the main criterion in this case. by shareholders for the entire period (i.e. €15.42), so that their transfer to EDF capital effectively results in a white deal. Thus, the offer price will be set at 16.58 euros.

3) Reference to the opening price is all the more necessary given that the placement on the market was carried out on dubious terms.

The “great success” of the EDF stock launch in 2005 is highly questionable:

especially with regard to proper informing of natural persons: it is to be feared that many followed the interested requests of their “banking advisers” by not reading the 569 pages of the AMF Briefing Note and the 224 pages of its appendices. [1] ;

secondly, because the pressure from banking consultants on their clients was significant up to the fact that some shareholders became shareholders “without knowing it of their own free will” or “fictitious children” were added to them.: these forced sales were the subject of complaints from individuals to the AMF (Les Echos of 4 September 2007), which decided to sanction BNP Paribas and Société Générale.

finally, because marketing in 2005 was carried out at a high price: the price set by Bercy at €32 for individuals (€33 for institutions and €25 for employees) was indeed at the top of the indicative range announced at the launch of the subscription (€29.5 to €34, €10).[2]. Faced with the reluctance of professionals, the share of securities allocated to them had to be reduced from 50% to 40%, and, conversely, the share of individuals was increased to 60% in order to “stimulate broad public ownership of shares.” Indeed, there were 4,900,000 individual shareholders involved in the operation, including 130,000 employees, but at the end of December 2000, in an article titled “Folk capitalism operation turns into a fiasco”, Les Echos notes that the massive support from banks in the days after the introduction to maintain courses. [3]

four) It would be unfair if privatization turned out to be a bargain for the state and a financial disaster for minorities.

However, here is what happens if the expropriation of minority shareholders is carried out at the government’s forecast price of 12 euros:

As for minorities, for the period from IPO (November 18, 2005) to July 20, 2022, the return on investment with dividend reinvestment is negative (minus 13%) for the EDF shareholder, while it is 30.85% for the Livret A holder, and that while At the same time, CAC 40 rose by 140.57%, SBF 120 by 155.88% and STOXX600 Utilities Index by 177.88%.

As for the state, the assessment of the privatization period is far from negative: it received 27 billion dividends and cashed out 3.7 billion euros from the sale of 2.5% of the capital at a price of 82.5 euros on 3 December 2007, the highest and just before the 2008 crash, for a total of over 30 billion euros. The State Treasury has also collected a tax on dividends paid by minority shareholders, estimated at 1.4 billion euros. [4].

5) Finally, it would be unfair if the minority exodus operation gave the state the opportunity to make a lucrative deal. by buying at a knockdown price a company whose devaluation he greatly contributed to. With regard to extrusion, we are also talking about determining not the price, but the amount of compensation (see Art. 237-6 of the AIF General Regulations ” settlement depositories carry out operations on the transfer of securities not presented in the last offer of the initiator paying the corresponding amount compensation from these titles……..” Fairness requires that this expropriation compensation be such as to compensate for the damage caused by the state, expropriating the majority shareholder, to the millions of depositors who trusted him in 2005.

Thank you for taking these considerations into account when exchanging views with various stakeholders prior to the submission of the government proposal and, at the latest, when the verification of its compliance comes, I ask you, Mr. Chairman, to accept my highest respect.

Colette Neuville



[1] It is vain to argue that they also had in their possession a 76-page summary operating note, since it states that “any decision to invest in EDF shares under an open price to the public in France and guaranteed global placement among institutional investors in France and beyond outside (and among the public in Japan) should be based on an exhaustive study of the prospectus regarding the public offering and the guaranteed global investment mentioned above. »

[2] Echo Forest November 21, 2005

[3] The damage suffered is obviously much higher for those who bought the 45 million shares sold by the state for €82.5 (€66 for employees) in 2007, the highest immediately before the 2008 financial crisis.

[4] At a tax rate of 30%