Areva warns of looming 4.9bn full-year loss as write-downs grow

Tuesday, February 24, 2015

Areva, the French nuclear group, on Monday issued its fifth profit warning in seven months, saying it expected to report a €4.9bn loss for 2014 as cost overruns ballooned on key European projects.

The annual net loss - due to be the largest the state-controlled group has ever recorded - comes as Areva works with the French government on the details of a state-backed rescue package, according to people familiar with the situation.

Areva's new chief executive Philippe Knoche is due to present on March 4, when full-year results are published, his strategy to reduce the group's large debt load and restore it to profit.

Areva has not sold a new nuclear reactor since 2007 and has been grappling with fierce competition from US, Russian and South Korean companies. It is also contending with weaker demand for nuclear energy following the Fukushima disaster in Japan.

Areva has been hit by cost overruns on its flagship Finnish Olkiluoto 3 reactor, which is due to come online in 2018, 10 years behind schedule. The project has so far been the subject of €3.9bn of impairment charges - with analysts expecting more writedowns at the group's full-year results.

In a statement on Monday, Areva, which has a 10 per cent stake in the Hinkley Point nuclear project in the UK, said its 2014 impairment charges were also related to its new French uranium conversion plant Comurhex II.

The company also warned of further provisions on renewable energies contracts, having already incurred charges of €373m on its discontinued solar business.

Areva declined to comment on a possible state bailout. People close to the matter said a rescue package had not been finalised.

Shares in the group, which fell 2 per cent on Monday, have halved in value from the beginning of last year.

Areva started the year with a new senior management team aiming to turn round the fortunes of the group and convince the French government, which has an 87 per cent stake, to come to the rescue of the company.

Mr Knoche, Areva's former chief operating officer, became chief executive and Philippe Varin, former head of PSA Peugeot Citroën, has become chairman.

At Peugeot-Citroën, Mr Varin negotiated a €3bn rescue package for the struggling automobile manufacturer involving Chinese carmaker Dongfeng and the French government.

Earlier this month Jean-Bernard Lévy, chief executive of Areva's key customer EDF, squashed rumours that the French power utility had plans to take a stake in some of the business units of Areva.

Areva said earlier this month that further project writedowns, combined with some increased provisions relating to new regulation on nuclear decommissioning, would cause the group to "significantly downgrade" its net income for 2014.

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