The investment decision and its financing in a changing institutional environment: application of real options theory to the nuclear case.

Summary In France, the European Electricity Directive 96/92/EC of December 19, 1996 opens the electricity production sector to competition. Forced to separate its activities, Electricité de France, previously a regulated monopoly, will become an independent producer in a competitive market. It retains the programming of its investment in nuclear power equipment authorized by the regulator. This specific capital has a totally unrecoverable cost. The company cannot disinvest if market conditions become unfavorable. It can choose to wait until it has more information on future market conditions before accepting the project. We have characterized the institutional change in the production segment by cost price uncertainty scenarios. We then highlighted, first, the influence of deregulation on its investment decision. In addition, the firm can go into debt to finance this equipment according to the principle of the project company, which isolates the nuclear and financial risks. In a second step, we calculated the long-term financing structure of the company and its impact on its investment decision.