Areva Selling $5.5 Billion of Shares to Boost Balance Sheet

  • Company working on sale of majority of reactor unit to EDF
  • Areva, EDF agree on reactor unit valuation of EY2.5 billion

Areva SA, the troubled French nuclear group whose stock has fallen more than 60 percent in the past year, will sell 5 billion euros ($5.45 billion) of new shares to stay afloat as it shifts its focus to uranium mining and enrichment as well as atomic-waste treatment.

Areva and Electricite de France SA, the state-controlled operator of atomic power plants that is seeking to buy a share of Areva’s nuclear reactor business, also said Wednesday that their boards have agreed to value that unit at 2.5 billion euros, with possible adjustments. EDF said it would be able to make a binding offer for a majority stake in that unit once arrangements to shield it from an atomic plant project led by Areva in Finland and contractual documents are finalized.

The proposed transaction marks Areva’s retreat from the reactor construction space, where it has racked up billions of euros of losses since starting to build an atomic plant in Finland in 2005. Areva’s construction of the new type of nuclear generator in Finland has been plagued by delays and cost overruns.

Areva’s 5 billion-euro capital increase is designed to “restore the group’s balance sheet situation,” the company, which is based in Courbevoie near Paris, said in a statement Wednesday. “The French state, as the leading shareholder, will take part in this and will ensure its success, in compliance with European regulations.”

Ensuring Success

The government will subscribe to the capital increase to ensure its success and invite minority investors to participate, the president’s office said in an e-mailed statement. Areva plans to give a complete update on its outlook and on the terms of the increase when it publishes 2015 annual earnings Feb. 25.

Areva said it expects the sale of most its reactor business to EDF will be completed in 2017. It would retain a stake of at least 15 percent in that business, while EDF said it would have a stake of 51 percent to 75 percent, making room for other investors to join.

The debt market responded positively to the plan to shore up the balance sheet.

Areva’s 1 billion euros of bonds due in September 2024 jumped 7.8 cents on the euro to 94 cents, the biggest increase in more than four years, according to data compiled by Bloomberg. The company’s 750 million euros of notes maturing in November 2019 rose 7.6 cents on the euro to 96 cents, the highest in more than three weeks.

Areva, which posted a net loss of 4.8 billion euros in 2014 after writing down assets and booking charges on the Finnish project, said last July it needs to make divestments and sell new shares to help fund 7 billion euros of spending and debt repayments by 2017. It was downgraded in December by Standard & Poor’s to B+, four steps below investment grade.

The company said Wednesday it incurred another loss in 2015, citing the restructuring and losses from reactor and renewables projects, and a writedown of mining assets, among others factors. It had a negative operating cash flow of about 600 million euros last year, the company added.

Areva agreed last month to sell its Canberra nuclear-measurement unit to Mirion Technologies Inc., a rival owned by Charterhouse Capital Partners. The company is also considering divesting a unit that makes reactors for military ships to the French government.

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