Areva Said to Postpone Investment to Cut Debt After Japan Quake
Areva SA, the world’s largest maker of nuclear-power plants, may postpone some investment to mitigate the effects of Japan’s Fukushima disaster on its cash flow and debt, a person familiar with the matter said.
Areva may proceed more slowly with spending on African mines and plant construction in the U.S., said the person, who declined to be identified because the company has yet to publish new forecasts. The slowdown will partly compensate for delays of large contracts and related payments and will help further reduce debt, the person said.
The Paris-based company has dropped its targets for revenue, margins and cash generation for this year and next, saying the catastrophe at the Fukushima plant in March changed the markets in which Areva operates. Areva had previously predicted “significant” backlog growth, rising revenue, and an operating margin of more than 5 percent for 2011. For 2012, the company had targeted revenue of 12 billion euros.
Following the worst nuclear crisis since 1986, countries from China to the U.K. are considering tighter safety rules as they plan to build new nuclear plants. Germany wants to progressively close its 17 reactors by 2022.
Areva fell 93 cents, or 3.4 percent, to 26.27 euros at 1:21 p.m. in Paris. The stock has dropped 28 percent this year, while France’s benchmark CAC40 Index rose 0.8 percent.
Areva will announce revised targets in coming weeks, after reviewing the impact from Japan, Pauline Briand, a spokeswoman for the company, said in an e-mailed statement.
The increased focus on nuclear safety may help Areva generate business to make up for some of the lost revenue, the person said. Areva also stands to book a 648 million-euro ($950 million) payment by Siemens AG (SIE) following a court ruling that found the German company breached contractual obligations tied to a nuclear venture with Areva.
Areva’s net debt stood at 3.67 billion euros at the end of last year. The company’s credit rating was cut by two steps to BBB+ at Standard and Poor’s in 2010.
Following the nuclear accident in Japan, decisions on the construction of nuclear plants may be delayed by six to nine months as regulators review safety data and rules, Areva Chief Executive Officer Anne Lauvergeon said on BFM Business radio on May 30. Areva will publish new “guidances” in coming days or weeks, she said.
When she presented earnings on March 3, Lauvergeon predicted four to six new orders for nuclear reactors in the company’s backlog by 2012 as Areva was holding talks with Indian and Chinese utilities. The company will invest less than 2 billion euros per year in 2011 and 2012 as part of a plan to achieve a “significantly” positive free operating cash flow in 2012, she said at the time.
Even before the Japanese disaster, Areva said in February it would delay the move to full capacity of its Trekkopje uranium mine project in Namibia by a year to 2013. In Niger, the development of its Imouraren mine has been held back by the abduction of employees and subcontractors by suspected members of al-Qaeda in the Islamic Maghreb in September 2010.
In the U.S., Areva is building a mixed-oxide fuel plant in Savannah River, South Carolina, which will be able to recycle plutonium recovered from surplus weapons, and a plant in Newport News, Virginia, which will make reactor vessels and steam generators for the U.S. nuclear market.
Areva is working on the certification of its EPR reactor in the U.S. It has also received a $2 billion loan guarantee from the Department of Energy to build a uranium enrichment plant in Eagle Rock, Idaho.
To contact the reporter on this story: Francois De Beaupuy in Paris at firstname.lastname@example.org
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