Francois Hollande says Franco-German plan to focus on renewable energy, not mergers

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SummaryFrench President Francois Hollande's surprise announcement of a Franco-German energy joint venture did not target major utilities but renewable energy and electricity networks, his aides said on Wednesday.

French President Francois Hollande's surprise announcement of a Franco-German energy joint venture did not target major utilities but renewable energy and electricity networks, his aides said on Wednesday.

A senior Elysee Palace source told Reuters a joint French-German cabinet meeting on Feb. 19 in Paris will discuss ways in which the two nations can cooperate in renewable energy, and would also discuss smart grids, energy efficiency and storage.

Industry and energy ministers will discuss ways to realise Hollande's proposal for a Franco-German energy firm modelled on aerospace group Airbus.

Hollande's proposal on Tuesday had baffled French and German industrialists and raised eyebrows in Berlin, but the source said Hollande had discussed energy cooperation with German Chancellor Angela Merkel during her visit to Paris on Dec. 18.

"We have a strong interest in the closest possible cooperation on energy policy whether on a political or corporate level," a spokesman for the German Economy Ministry, which is responsible for energy, told reporters.

He added that the exact design will be discussed intensively in the coming days and weeks.

Sources ruled out an imminent capital operation or alliance between French state-controlled utility EDF or partly state-owned gas and power group GDF Suez and one of the major German utilities such as E.ON or RWE.

"The president's goal is to coordinate our energy transitions and to find ways to take industrial initiatives together," the French source said.

Hollande wants French and German energy firms to pool their capacities in the way Airbus brought together engineering and production skills from the two countries.

"If it had not been for Airbus, our companies would now be subcontractors to international aviation firms," the source said, adding that while the industries were different, the challenges were similar.

The German Economy Ministry spokesman said the cooperation will be intensively discussed in coming weeks and months.

"If I understand it correctly, the French president was not suggesting a 1-1 transfer of the Airbus model to other branches, he was saying that this kind of close cooperation on different levels can be a be a guide and we share that view," he said.

France and Germany are undertaking major shifts in their electricity generation mix. Following Japan's Fukushima disaster in 2011, Germany has decided to phase out nuclear energy, while Hollande has pledged that by 2025 he will reduce France's reliance on nuclear power to 50 percent from 75 percent now.

This accelerated shift out of nuclear, coupled with a boom in renewable energy such as wind and solar, is putting a strain on their power networks and could jeopardise energy security.

The source said the solar industry was an example where a lack of cooperation between the two leading European countries had let foreign - notably Chinese - photovoltaic panel makers steal a march on European industry.

Hollande's Airbus example does not mean the cooperation necessarily runs via the large listed companies that dominate the energy sector in both countries.

"The idea is not to put the likes of Siemens, Schneider or GDF Suez into one mega-company," the source said, adding that capital alliances could not be ruled out.

Cooperation will likely take the form of joint ventures and industrial alliances, and small and medium-sized companies will play a major role.

A source at a major French energy firm said management was completely taken aback by the announcement.

A government source said the existing French-German Office for Renewable Energies will drive the coordination.

"We have already established the structure. Now the ministers need to give it the necessary impetus," he said.

Former energy ministers Delphine Batho and Peter Altmaier discussed cooperation in June last year, but the sacking of the outspoken Batho and the German elections delayed the initiative.

Batho was replaced by Philippe Martin, and Merkel last month appointed SPD member Barbara Hendricks as environment minister.

Initial talks on the French-German energy initiative focused on security of supply, better interconnection of power networks and the support for renewable energies.

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