French nuclear company Areva SA agreed to cede control of its atomic reactor business to Electricite de France SA, and plans a capital increase next year to prop up its remaining uranium mining and fuel treatment operations.
The company aims to sell at least 75 percent of the Areva NP unit for 2 billion euros ($2.2 billion) to help fund 7 billion euros in expenditure and debt repayment by 2017, it said in a statement on Thursday. It will also dispose of another 400 million euros of assets, raise 3.4 billion euros through the combination of capital raising and other measures and improve cash management.
The proposed deal between the state-controlled companies, brokered under pressure from French President Francois Hollande, opens the door for a government bailout of Areva. It also marks the company’s retreat from the nuclear reactor construction business in which it has racked up billions of losses since starting to build a new generation of atomic plants in Olkiluoto, Finland, in 2005.
Areva now plans to commission a Finnish plant by the end of 2018, Chief Executive Officer Philippe Knoche said on a conference call. The initial startup date was 2009. The project was hampered by cost overruns, disputes with the customer and problems with construction.
EDF, Areva NP, and their subsidiaries “will be completely immunized against any risks related to the Olkiluoto 3 project,” EDF said in a statement on Thursday. The utility agreed to buy at least 51 percent of the atomic reactor business, with Areva keeping a maximum of 25 percent. The companies aim to complete the transaction next year and said other minority partners may join the venture.
Bernard Fontana, who was CEO of Swiss cement maker Holcim Ltd. until the merger with France’s Lafarge this month, was named as new head of Areva NP, starting on Sept. 1, Areva said. He previously held various positions in the defense and steel industries.
Areva shares gained as much as 7 percent, the most in almost two months, and traded 4.3 percent higher at 8.65 euros as of 2:50 p.m. in Paris, valuing the company at 3.3 billion euros. EDF shares rose 3.2 percent.
The deal remains subject to the outcome of progress checks regarding a reactor vessel built by Areva for an EDF nuclear plant in Western France, in which the French regulator found some faults.
As losses mounted, Standard and Poor’s cut Areva’s credit rating to non-investment grade in 2014. The company’s net financial debt rose to 6 billion euros at the end of June as it posted a net loss of 206 million euros in the first half.
Economy Minister Emmanuel Macron said this month that the government will work on a recapitalization of Areva from September once the company comes up with a viable business plan. Any rescue will probably will be scrutinized by Europe’s competition body. France owns 87 percent of Areva and 84 percent of EDF.
The company posted a record 4.8 billion-euro loss last year as it took new charges for cost overruns at nuclear plant projects in France and Finland, and separate renewable energy projects. It also had to write down assets amid slowing demand for nuclear fuel and services in countries including Japan and Germany in the wake of the Fukushima accident in 2011.
Areva will cut as many as 6,000 jobs as part of a plan to cut costs by 1 billion euros by 2017, including 500 million euros at the new, streamlined version of the company. The new Areva, which will also enrich uranium and offer logistics and dismantling services to nuclear facilities, will have about 4 billion euros in revenue once the deal with EDF is completed, about half the size of the current group.