Loss-making Areva bets on cost cuts, EDF partnership, China

[PARIS] French nuclear group Areva pledged to cut 1 billion euros ($1.52 billion) of costs, boost its partnership with utility EDF and expand in China in an attempt to turn around the loss-making, state-controlled company.

Areva's 2014 net loss soared to 4.83 billion euros, slightly below the unaudited 4.9 billion announced last month, dragged down by charges including 720 million of new provisions on its Olkiluoto 3 Finnish reactor project, it said on Wednesday.

Areva said it would detail a three-year financing plan before publication of first-half results on July 30 that would include more selective capital expenditure, asset disposals and partnerships with an equity component. "The company is also studying ways to adequately strengthen its equity," Areva, which has made losses in the last four years and is 87 per cent state-owned, said in a statement.

Areva is struggling with a global slowdown in nuclear plant orders following the 2011 Fukushima disaster, and heavy losses related to the Olkiluoto 3 project and the Uramin uranium mine in Africa. It lost 494 million euros in 2013, 99 million in 2012, and 2.42 billion in 2011 due to provisions on Uramin.

Areva said world nuclear generating capacity was nonetheless set to rise by 50 per cent by 2030, led by Asia, according to available estimates. But traditional customers were under heightened economic pressure in the mature nuclear markets of Europe and the United States, with this passed on to suppliers.

It said local competitors in the fast-growing markets of China, South Korea and Russia benefited from the growth of"essentially captive domestic markets" and from their ability to finance projects.

Areva said that as part of its new partnership with EDF, it would need to optimise its reactor line. Areva currently sells only one reactor model, the 1650 megawatt EPR, one of the biggest and most expensive on the market. A smaller model, the Atmea, has never been built.

The company also said it was aiming for 1 billion euros of annual cost savings by 2017, with capital expenditure kept below 3 billion in total over 2015-17, and a more extensive asset disposal programme than announced last October.

The group said it was targeting positive operating cash flow in 2017 and positive net cash flow in 2018. Negative net cash flow was 1.34 billion last year and would be between 1.3 billion and 1.7 billion this year, Areva said.

REUTERS