Areva plans to cut costs by $1.1 billion by 2017
Areva has a two-part strategy to refocus on its core business of nuclear power and return to competitiveness, aiming to make savings of about €1 billion ($1.1 billion) over the next few years after a record loss in 2014 of €4.83 billion ($5.38 billion).
Areva - which is 87% owned by the French state - attributed the size of the loss to costs associated with delays to its nuclear and renewable energy projects. Revenue dipped 7.2% year on year to €8.34 billion ($9.29 billion), of which nuclear operations accounted for €8.21 billion ($9.14 billion) - down 7.3% - and renewables operations €53 million ($59 million) - down 21.4%.
As well as construction delays, including to the Olkiluoto nuclear power plant in Finland, Areva said its bottom line was also hit by impairment charges to upgrading work at its Comurhex II uranium conversion plant project in France.
The company, which plans to announce by the end of this month a three-year financing plan to achieve the cost savings, said it will sell assets and start talks with trade unions about potential redundancies. It aims to reduce capital expenditure to less than €3.0 billion ($3.3 billion) between 2015 and 2017. Other considerations for Areva include liabilities from new regulations on the decommissioning of nuclear fuel facilities.
Transformation plan
Areva has undertaken a strategic review of its operations since November and this is being carried out "without compromise", it said today. As a result, the group is now able to announce a "solid transformation plan that sets a challenging but economically realistic course for our teams".
First, Areva will refocus on its core business - "mastery of key nuclear processes essential to operators around the globe". This strategic redeployment will lead to the revision of certain goals, whether in the management of new reactor projects or in renewable energy, it said.
Secondly, Areva, which said its resources had been "marshalled to support a spurt of growth in nuclear power", must now "adapt to new market realities and become competitive once again". The group's most urgent task is recovery and securing its future by immediately launching a "far-reaching competitiveness plan founded on organizational simplification, quality of operations, and a completely revamped approach to managing risk in large projects".
Areva said it would streamline its renewables asset portfolio by continuing offshore wind operations via a joint venture with Spain's Gamesa and seeking partners in the solar and bioenergy operations.
Philippe Knoche, Areva CEO since January, following the passing in December of his predecessor Luc Oursel, said the scale of the net loss for 2014 illustrated "the twofold challenge" confronting the company. These are the "continuing stagnation of the nuclear operations and lack of competitiveness and difficulties in managing the risks inherent in large projects," he said.
Knoche said the company's nuclear power customers in Europe and the USA are under increasing economic pressure, while some of its rivals in the new build market - national companies from China, Russia and South Korea - are able to finance their own projects as well as enjoy their own captive domestic markets.
Areva also said it aims to strengthen its presence in China, where it is building two EPRs at the Taishan site in Guangdong province. It will develop the strategic agreement it signed with China National Nuclear Corporation in March 2014 and pursue its partnership with China General Nuclear by capitalizing on the progress of the Taishan 1 and 2 reactor project.
Areva also said it will enhance its partnership with EDF, the French utility giant, with which it is working on completion of Flamanville 3 in France and construction of Hinkley Point C in the UK. The two companies are also working together on the Jules Horowitz research reactor construction project at Cadarache in southern France.
Amid speculation of a state rescue plan for the group, French economy minister Emmanuel Macron told Reuters news agency yesterday that Areva "must present its operational and strategic choices before the state will rush into any financial operations".
Researched and written
by World Nuclear News
