France Backs EDF-Areva Nuclear Merger

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The French government has given its approval to a plan by state-owned utility Electricite de France (EPA:EDF) (EDF) (Paris) to take over the nuclear reactor business of struggling engineering giant AREVA S.A. (EPA:CEI) (Paris, France).

The office French President Francois Hollande announced its support--both political and financial--for a plan to merge the nuclear reactor businesses of both companies into a single venture controlled by EDF. The news comes less than a fortnight after Industrial Info reported that EDF made an alleged offer of 2 billion euros ($2.2 billion) for Areva's nuclear business. For additional information, see May 28, 2015, article - EDF Bids for Struggling AREVA's Nuclear Division.

In a statement, the government pledged to financially support the deal, which will redraw the French nuclear landscape. "This industry is crucial to preserve our energy independence," said the President's office. "The state will recapitalize AREVA, acting as a prudent investor, as much as necessary."

The government controls 87% of AREVA and 84% of EDF. France relies on nuclear power for about 75% of its electricity, generated by a fleet of 58 reactors. It is Europe's most nuclear-dependent nation, and because of its low cost of generation, it is also Europe's largest electricity exporter. Most of its reactors were designed by AREVA, formerly Framatome.

It added: "EDF aims to become majority shareholder of Areva NP (formerly Framatome), the subsidiary of the nuclear reactor group, while the latter will retain a strategic stake in this subsidiary. From now on, the activities of design, project management and marketing of new reactors EDF and Areva will be reconciled in a dedicated company."

The shake-up is deemed necessary as AREVA continues to hemorrhage cash. For its 2014 financial year, the company recorded record losses of 4.8 billion euros ($5.4 billion) after absorbing costs and penalties related to chronic delays to its European Pressurized Reactor (EPR) nuclear projects at Olkiluoto in Finland and Flamanville in France. Last month, AREVA revealed that 6,000 jobs would have to be cut as it struggles to make immediate cost-saving measures to the tune of 1 billion euro ($1.1 billion) by 2017. For additional information, see May 18, 2015, article - Nuclear Engineering Giant AREVA to Shed 6,000 Jobs.

In a statement about the proposed merger, AREVA said: "The French State has announced a series of guidelines to renew the French nuclear industry. AREVA and its governing authorities will work in complete cooperation with EDF on the roadmap as it is defined, notably on the terms of an agreement for a global strategic partnership and the conditions for EDF to take a majority stake in the capital of AREVA NP."

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