The French Government has recommended that AREVA should sell its nuclear reactors to Electricite de France, a power utility who operates nuclear reactors in France which is also majority-state owned.[i]
The nuclear industry in France has been struggling to deal with bad investment decisions and an international retreat on nuclear power after the Fukushima Daiichi nuclear disaster.
AREVA, a state-controlled nuclear engineering company, was gambling on increased demand around the world for new nuclear reactors, but instead has been greatly affected by the global pull back on nuclear power investment after the 2011 nuclear disaster in Japan.
In 2014, AREVA reported an annual net loss of $5.4 billion USD, the fourth consecutive year of reporting a deficit.
The French state owns 87% of AREVA and is considering whether reorganizing the nation’s state-controlled utilities would improve overall competitiveness and profitability.
The workers unions which represent AREVA employees have opposed the plan to sell any of the company’s nuclear reactor operations, because they believe it would effectively remove the company from the nuclear industry.
While AREVA owns uranium mines, manufactures nuclear fuel, decommissions nuclear facilities, and processes nuclear waste, it is the nuclear reactor operations which are its core business, representing nearly 40% of the company’s total revenue in 2014.
“The members of the Group Committee France oppose dismantling the group through a total or a partial sale of Areva NP to EDF,” the CFDT, CGT, FCE-CGC, FO and UNSA unions said in a joint statement.[ii]
AREVA is pursuing its own plan to overhaul and turnaround the company, which includes the sale of assets, cost cutting efforts, the reduction of capital expenditure, and laying off employees.[iii]
According to French Economy Minsister Emmanuel Macron, some solution for the AREVA problem will be chosen by the end of the month.
In the early 2000s, AREVA positioned itself to be a cradle-to-grave provider of services to the nuclear industry. The company attempted to work itself into all areas of the industry, mining uranium, building new reactors, providing parts and services to operating reactors, processing nuclear fuel and nuclear waste.
AREVA has been forced to reconsider its new-build reactor projects because they have represented most of the company’s debts and losses over the last 10 years, while only producing 8% of its profits.[iv]
Philippe Knoche, the chief executive of AREVA, has said that the company should focus more on its nuclear supply chain operations, given the poor performance of its new-build projects.
In Olkiluoto, Finland, AREVA is facing an uphill battle to complete a contract to build a next-gengeration nuclear reactor, which is scheduled to start operations nearly a decade later than originally planned and has cost nearly 300% of original estimates.
AREVA also lost over a billion dollars when it purchased the uranium mining company UraMin in 2007 after the price of uranium dropped and estimates of the uranium reserves in mines in Africa did not meet up to expectations at the time of sale.[v]
Meanwhile in France, AREVA is behind schedule and over-budget in the construction of a second EPR at the Flamanville nuclear power plant and is having difficulties mitigating liabilities that are imposed by new regulations which dictate the decommissioning of nuclear fuel fabrication facilities.