Areva nuclear group announces 4.8 bn euro loss

4th March 2015, Comments 0 comments

French nuclear group Areva confirmed Wednesday record net losses in 2014 of 4.8 billion euros ($5.3 billion) after it was forced to absorb costs linked to delays to its flagship next-generation reactor.

The mostly state-owned company, which had forecast losses of 4.9 billion euros, said it would make savings worth around one billion euros over the next few years and announce a financing plan by the end of March.

"The scale of the net loss for 2014 illustrates the two-fold challenge confronting Areva: continuing stagnation of the nuclear operations, lack of competitiveness and difficulties in managing the risks inherent in large projects," chief executive Philippe Knoche said in a statement.

Areva has taken a particular hit in the past year from delays in building its Olkiluoto 3 nuclear plant in Finland, as well as difficulties with its renewable energy contracts.

The company also said earlier there were impairment charges that brought total write-downs on assets and losses on projects to 4.35 billion euros.

The company, which is 87-percent owned by the French state, has suffered in recent years as interest in nuclear power has cooled following the 2011 Fukushima catastrophe in Japan.

Areva announced in October that it would cut investments and step up sales of non-strategic assets as it tries to shore up its finances.

More assets are to be sold than the 450-million-euro target announced last October.

"The challenge for all of us today is to implement the transformation plan in all its aspects, to make Areva, in the French nuclear industry, a refocused, simplified, competitive group in a position of recovery," said Knoche.

Areva, which hasn't turned a profit since 2010, said restructuring should allow it to return to margin levels "comparable to those of our competitors in different global markets" within three years.

During a press conference after the announcement, however, Knoche said he couldn't exclude job cuts.

"We will do everything so that if there are departures that will be done on a volunteer basis," said Knoche.

But with unemployment running at near record levels in France, and job cuts at major companies -- particularly state-owned businesses -- politically sensitive, members of France's leftist government rushed to calm fears of mass redundancies.

"Everything must be done to avoid layoffs," Socialist Prime Minister Manuel Valls told parliament following the announcement. "I hear the fears of (Areva) employees... We will not let them down."

Unions expressed concern with both job cuts and cost-cutting plans feared sufficient to compensate for the nearly five billion euro loss.

"It is clear that recapitalisation is necessary," said Jean-Pierre Bachmann, a representative of the French Democratic Labour Confederation union at Areva, who noted the threat to jobs was only part of his problem with the restructuring plan.

"The group has not yet been saved. The state must assume its responsibilities."

On Wednesday, Economy Minister Emmanuel Macron rejected the notion of direct state recapitalisation of Areva as "premature".

But other ways of injecting badly needed cash into company coffers are being considered.

Knoche held out the possibility of talks with EDF, the French state-owned electricity firm which is Areva's top customer, about it taking a stake in the company.

France's government has backed further consolidation of the country's nuclear energy sector, including increased cross-holding stakes between the two companies.

"The state will examine proposals by the managements of EDF and Areva, which have begun discussions in view of a refoundation of the French sector... (which) is an essential factor in the energy independence of our country," said a joint statement from Macron, Energy and Environment Minister Segolene Royal and Finance Minister Michel Sapin.

To facilitate that consolidation, Valls said Areva and EDF must put nasty past rivalries and clashes behind them, and "work together in the closest cooperation possible."

After initially rising in morning trading, Areva's shares closed out 1.25 percent down Wednesday on the Paris stock exchange, which ended the day up 0.99 percent overall.

© 2015 AFP

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