Areva to Tap China, Gulf Investors in Capital Increase Plan

  • French Minister Sapin banking on foreign investors for Areva
  • Areva needs to raise 3.4 billion euros to reduce debt

Areva SA will turn to investors in China and the Gulf states to raise a sizable piece of the capital it needs, Finance Minister Michel Sapin said in an interview in Paris, a move that will cap the French state’s support for the troubled builder of nuclear reactors.

“We’ll have what’s needed in terms of state financing,” Sapin said, adding that “We want foreign investors to participate in the capital increase. That would mean savvy investment.”

Funding from private and foreign participants may help secure European Commission approval for Areva’s plan, and avert criticism it’s being kept afloat with state aid. State-controlled Areva said in July it will need to raise 3.4 billion euros ($3.8 billion), mostly through a capital increase, to reduce its debt. It also plans to cede control of its reactor business and other assets. The company, which plans to refocus on uranium mining and enrichment and nuclear waste recycling, seeks to fund 7 billion euros in expenditure and debt repayment by 2017.

Sapin said China would be the biggest potential investor in Areva since the country has the biggest “expansion potential for nuclear activities.” President Francois Hollande is planning a visit to China early November and Areva will be a part of the talks, the minister said. He added that the Gulf states were also among possible investors in the capital increase.

Unit Sale

Areva last held a capital increase in December 2010, when France and the Kuwait Investment Authority bought 300 million euros and 600 million euros, respectively, of new shares at 32.50 euros per share.

Since then, Areva shares have dropped 79 percent, trading at 6.75 euros on Tuesday and
giving it a market value of 2.6 billion euros.

Areva said in July it aims to sell at least 75 percent of the atomic reactor business, Areva NP, for 2 billion euros. Utility Electricite de France SA agreed to buy at least 51 percent of the business and the companies aim to complete the transaction next year. Areva is also in talks with Mitsubishi Heavy Industries Ltd. to sell it a part of the nuclear reactor production unit, Nikkei reported Oct. 5.

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.

Industrial Plan

Areva will cut as many as 6,000 jobs as part of a plan to reduce costs by 1 billion euros by 2017, including 500 million euros at the new, streamlined version of the company.
The new Areva will have about 4 billion euros in revenue once the deal with EDF is completed, about half the current level.

A large proportion of foreign investors in Areva would “be a demonstration that Areva’s industrial plan is indeed focused on growth and profits,” Sapin said.

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