PARIS French utility EDF (EDF.PA) could take a stake of up to 40 percent in Rio Tinto's Saint-Jean-de-Maurienne aluminum plants in exchange for agreeing a discount on the electricity it supplies, financial daily Les Echos reported.
Rio Tinto is negotiating with Germany's Trimet Aluminium AG over a sale of the 148,812 ton Saint-Jean-de-Maurienne plant in the French Alps. A key element in the deal will be the price at which the new owner can buy electricity from EDF, as power makes up 20 to 40 percent of the production cost of aluminium.
Les Echos said that under the terms of a multi-decade contract with EDF expiring in March 2014 the plant bought power at 17 to 20 euros per megawatt-hour.
The paper said EDF has proposed a new tariff of 25 to 30 euros per MWh, compared to current market rates of around 28.5 euros per MWh which have fallen sharply in the past year. The difference would be paid in shares in the plant, which could let EDF's stake rise to as much as 40 percent.
EDF and Rio Tinto both denied comment on the report.
A Rio Tinto official told Reuters earlier this week that Trimet has made a firm offer, but if no deal is reached by the end of June, the closure of the plant remains an option.
With some 600 jobs at stake, the Saint Jean plant is a sensitive issue for the French government, struggling to reverse a rising unemployment trend, and the paper said that in exchange for helping to keep the plant open, EDF might get other favors from the French government such as the right to keep control of the hydro power dams close to the plant.
France is debating whether to open its hydropower sector to foreign competition.