Bloomberg News

Areva Sees 1.6 Billion-Euro Loss in 2011 on Writedowns

December 13, 2011

(Adds cost cuts, asset sales and targets from fourth paragraph.)

Dec. 12 (Bloomberg) -- Areva SA, the world’s biggest supplier of nuclear fuel and services, forecast an operating loss of as much as 1.6 billion euros ($2.1 billion) in 2011 on asset writedowns at mining projects and planned plant closures in response to the nuclear accident in Japan in March.

The company plans 2.36 billion euros of provisions, including 1.46 billion euros for impairments of property and equipment at its UraMin unit’s mining operations in Namibia, the Central African Republic and South Africa, Paris-based Areva said in a statement today. The company also took charges on nuclear fuel plants that will be closed and on construction projects including one nuclear plant it’s building in Finland.

“The market will be less booming than previously anticipated,” Pierre Boucheny, a Paris-based analyst at Kepler Capital Markets, said in an interview before the strategy was published today. “Investments will be significantly reduced.”

Oursel, who took over from Anne Lauvergeon as CEO in June, said he will cut costs by at least 1 billion euros by 2015 and sell at least 1.2 billion euros of unspecified assets by 2016 to restore profitability. He’s under pressure from Standard and Poor’s to shore up the finances, while the French government, which controls 83 percent of Areva, is pressuring him to retain jobs in France in advance of next year’s presidential election.

Falling Stock

The company’s BBB+ credit rating may be lowered, barring no “substantial improvements in profitability and credit metrics in 2012,” Standard and Poor’s said on Aug. 5, citing “increased uncertainties” surrounding the nuclear industry and Areva.

Areva fell 1.13 euros, or 5.6 percent to 19.20 euros in Paris, the most since Oct. 4. The stock was suspended from trading most of today before the announcement.

Areva shares have lost 47 percent this year as Germany shut eight of its 17 reactors and decided to exit nuclear power completely by 2022 following the disaster at the Fukushima Dai- Ichi nuclear plant in Japan in March. Switzerland has also decided to progressively close plants, and public opposition to nuclear energy is mounting in nations such as Japan, where most reactors are still idled.

Cutting Reserves

Areva’s board will set up a committee to examine conditions of acquisition and further operations of UraMin, bought for about $2.5 billion in 2007. Areva cut the estimated amount of uranium reserves at its Trekkopje mine in Namibia by 42 percent today.

Oursel, who is due to outline its strategic plan to investors tomorrow morning in Paris, still expects organic revenue at Areva’s nuclear business to rise 3 percent to 6 percent next year and in 2013, before accelerating to as much as 8 percent in the 2014-2016 period.

Areva may have an outflow of free operating cash before tax may of as much as 1.5 billion euros in 2012, reach break-even in 2013 and turn positive by more than 1 billion euros by 2015 as sales rise and capital expenditure declines, the CEO forecast.

Areva’s finances have been hurt by construction delays and cost overruns at a first-of-a-kind, 1,600 megawatt nuclear reactor that it’s building in Finland, which had already led to 2.6 billion euros in charges. Areva announced an additional 150 million euro provision for that project today.

The company is building a similar reactor in France and two others in China, and is in talks to sell more reactors or preparing for future tenders in countries including China, India, South Africa, the U.K., Poland, the Czech Republic, the Netherlands and Finland as they seek to limit greenhouse gas emission and cut reliance on fossil fuels.

--Editors: Tom Lavell, David Risser

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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