French public company Areva has set out its detailed plans to sell the majority stake of its reactor business to EDF and a restructuring through the creation of a new company focused on the nuclear fuel cycle. The company expects to complete the process next year.
In late July 2015, EDF and Areva announced they had signed a memorandum of understanding setting out the principal terms and conditions for EDF to take a majority share in Areva’s reactor business, Areva NP. The following month, EDF’s board agreed on a final valuation of Areva NP’s activities at €2.5 billion ($2.8 billion) leading Areva’s board to give a mandate to CEO Philippe Knoche to finalize negotiations on the transaction.
The creation of a new entity – tentatively referred to as ‘New Co’ as is typical in this type of deal – focused on mining, the front-end and the back-end of the fuel cycle was announced by Areva in February. Areva said it plans to carry out the restructuring over the coming months, pending receipt of the necessary regulatory and contractual approvals.
The company also said New Co would be created as a wholly-owned subsidiary of Areva SA during the second half of this year, combining the Areva Mines, Areva NC, Areva Projects and Areva Business Support companies and their respective subsidiaries. Part of Areva SA’s debt would also be transferred to New Co. Meanwhile, Areva TA, Areva Renewable Energies and Areva NP will remain as subsidiaries of Areva SA “until the date of their sale”. Areva will also sell nuclear measurement and instrumentation specialist Canberra.
At the beginning of 2017, a total of €5 billion for capital increase would be divided between Areva SA and New Co. Following the transaction – which is subject to approval by the European Commission – the French State will hold, either directly or indirectly, at least two-thirds of New Co’s capital, with the remainder held by strategic investors.
Over the course of 2017, Areva NP’s operations will be sold to EDF, while the contract for the Olkiluoto 3 (OL3) EPR under construction in Finland will remain with Areva SA. This, Areva said, “would ensure its successful completion, with the necessary resources and in compliance with contractual obligations”. During the sale of Areva NP to EDF, 15% to 25% of the Areva NP’s capital would be transferred from Areva SA to New Co.
“Thus recapitalized, Areva SA … would reinforce its financial position in order to meet its financial obligations: debt repayment, costs related to the completion of the OL3 project, and extinguishment of project guarantees in renewable energies,” Areva said. It added, “The newly created and capitalized New Co, refocused on less risky cash flow-generating operations, would be in a position to refinance on markets in the medium-term.”
“The outlook presented today is the reflection of a renewed ambition,” Areva said. “As a pure player in the nuclear fuel cycle, New Co is in a unique position to play a dominant role for the redefinition of the French nuclear industry and in a market destined to grow, particularly in Asia.”
Areva CEO Philippe Knoche said: “By means of the solutions it can provide for uranium supply, for its conversion into fuel, and for nuclear fuel recycling, waste management and dismantling, New Co will be in a good position to grow in global nuclear markets. The strengthened capital structure, the new industrial plants, and the reinforcement of New Co’s technology and innovation base will underpin this strategy.”