- New Co., Areva preparing 5 billion-euro share sale in 2017
- Parent expects to raise 2.9 billion euros from asset disposals
Areva SA will spin off its nuclear-fuel operations this year to shield them from the troubled reactor business and attract investors as the French atomic group prepares to raise 5 billion euros ($5.6 billion) selling shares.
New Co., which will include uranium mining, enrichment and waste recycling, will target earnings before interest, taxes, depreciation and amortization of about 25 percent of sales and operating income of more than 10 percent by 2020, Areva said Wednesday in a statement. The combined business had an order backlog of 33 billion euros at the end of March, representing about eight years of revenue, Areva said.
“New Co. has strong assets in terms of technology, backlog, skills and performance,” Areva Chief Executive Officer Philippe Knoche said on a conference call. “It will be very well placed for an expected rebound in demand, notably on international markets.”
The move is part of a 7.9 billion-euro refinancing plan to pay down debt, fund operations and complete a plant in Finland that has been plagued by delays and cost overruns. The French government, which controls 86.5 percent of Areva, has pledged to take part in the bailout as the company contends with slumping demand after the 2011 Fukushima disaster and five straight years of losses.
In addition to the capital increase, Areva expects to raise 2.9 billion euros from asset sales, including the disposal of small-reactor maker Areva TA and Canberra, a unit of Areva SA, in coming months, along with the sale of most of its reactor business to state utility Electricite de France SA in 2017, it said.
Areva and New Co. will hold two separate share sales together valued at 5 billion euros at the start of next year. How the proceeds are split will depend partly on how much debt Areva will transfer to New Co., Areva said.
The French government will own at least two-thirds of New Co., both directly and indirectly through Areva. Strategic partners from China and Japan as well as other investors may take up to 33 percent of New Co., Chief Financial Officer Stephane Lhopiteau said on the call.
The French government is holding talks with the European Commission to get approval for the capital increases by the end of the year, Knoche said. The company will present a plan at the end of July to ensure that it continues to meet financial obligations if getting consent takes longer, he added.
Areva has 2.9 billion euros of debt repayments due from 2016 to 2019, and another 800 million euros of interest, the company said in a slide presentation. It also needs 1.1 billion euros to fund operations of New Co. in the period, and another 2.3 billion euros for other operations, including the completion of the OL3 plant in Finland.
New Co.’s cash flow will remain negative in 2016 and 2017 because of ongoing investments to cover future dismantling of nuclear reactors, Lhopiteau said. The company may return to a positive cash flow starting from 2018, he said.