EDF to Take AREVA's Nuclear Business in $2.96 Billion Deal

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - France's state-owned utility, Electricite de France (EPA:EDF) (EDF) (Paris), has confirmed that it will purchase a controlling stake in the nuclear reactor business of struggling engineering giant AREVA S.A. (EPA:CEI) (Paris, France) in a deal worth 2.7 billion euro ($2.96 billion).

The company will acquire a majority stake of 75% in the AREVA NP reactor business, which is responsible for equipment and fuel manufacturing as well as the servicing of reactors. AREVA will retain a 25% stake. EDF said it intends to seek one or more partners for a minority stake but that it intends to retain a majority stake of at least 51%. Subject to final regulatory approval, the deal will complete in 2016.

Industrial Info reported in June that the office of French President Francois Hollande had offered its full financial and political support for the deal. The government controls 87% of AREVA and 84% of EDF, while the country relies on nuclear power for about 75% of its electricity. For additional information, see June 11, 2015, article - France Backs EDF-Areva Nuclear Merger.

In a statement, EDF said: "It provides for a majority control (at least 51%) of AREVA NP by EDF, a maximum stake of 25% held by Areva as part of a strategic partnership, and the potential participation of other minority partners. This project enables to better secure the most critical activities of the Grand Carénage [major refurbishment] for the existing fleet in France, and to improve the efficiency of engineering services, project management, and some manufacturing activities through EDF's experience feedback".

Speaking to the media, EDF chief executive, Jean-Bernard Lévy, commented: "If we don't find other partners we could end up with 75%, but we think that after preliminary contacts we had and after potential partners have shown interest and Areva NP is a wonderful company...we think we will reach a tripartite situation."

He added: "In accordance with the guidelines set by the French government, this new collaboration between EDF and Areva forebodes an improved efficiency of our cooperation and increases the chances of success of our major international nuclear projects".

The deal is seen as vital for the future survival of AREVA, which has recorded massive losses in recent years.

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. In May, 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.

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