Areva Says It May Consider Recapitalization to Reduce Debt Load

Areva SA Chief Operating Officer Philippe Knoche said the unprofitable French maker of nuclear reactors and offshore wind turbines is open to consider all options to reduce debt, including a recapitalization.

Areva may have to cut jobs in France, which accounts for a third of its revenue and more than half of its workforce, Knoche said today at a parliament hearing in Paris.

There’s no “simple solutions, whether in terms of partnerships or recapitalization,” the COO said. The state-controlled company needs to “get out of the vicious cycle of over-indebtedness.”

Areva had its credit rating cut to non-investment grade by Standard and Poor’s this month after the company abandoned forecasts for 2015 and 2016 amid weaker-than-expected demand for nuclear fuel and services in Europe and Japan, and construction delays. Analysts expect the company will post a loss for a fourth year in 2014.

The nuclear plant constructor, which has about 7 billion euros ($8.8 billion) of gross debt “doesn’t have a short-term cash problem” as it has more than 2 billion euros of cash, Knoche said.

It may seek to strengthen partnerships in Asia to tap growth in nuclear and renewable energy markets, and will step up its cooperation with Electricite de France SA on the design of nuclear reactors.

Areva, which plans to outline targets for 2015-2017 when it releases 2014 annual results, cut investment plans and pledged fresh asset sales in October in an attempt to preserve its investment-grade rating.

It has been racking up losses in recent years after the Fukushima explosion in 2011 prompted nuclear plant closures in Japan and Germany. European utilities have cut nuclear plant maintenance spending and offshore wind investment in response to sluggish economic growth in the region.

The company got a capital injection by the French government and a Kuwaiti sovereign fund of 900 million euros in 2010.

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