Brussels poised to clear EDF takeover of Areva’s reactor business
Deal will allow a €5bn state-backed capital increase and wider restructuring
Brussels is expected to approve the takeover by French state-controlled utility EDF of the reactor business of Areva this week, clearing the path for a state-backed rescue deal that will reshape France’s nuclear industry.
Brussels antitrust watchdog is likely to sign off the deal on Monday, according to two people familiar with the situation, a green light that is needed before the French state can carry out the wider restructuring of Areva.
Once Areva’s reactor business is acquired by EDF, what is left of Areva, mostly a uranium mining and nuclear fuel business, will then need only a sign-off of its new reactor in Flamanville in France to unlock a €5bn state-backed capital increase scheduled for June.
EDF has agreed to acquire a majority stake in Areva NP, which designs, manufactures and services nuclear reactors, in a deal valuing the business at about €2.5bn.
The deal will unite two of the companies responsible for building the UK’s Hinkley Point C nuclear plant, the country’s first new atomic power station for a generation, in a move executives say should help to avoid the kind of costly delays that have beset similar projects.
Areva’s EPR reactor — the technology being used in Hinkley Point — has run into problems. The Flamanville III EPR reactor in France is still under construction, six years behind schedule and €7bn over budget. The other in Europe — in Olkiluoto, Finland — is nine years late and €5bn over budget.
Areva, which is 87 per cent owned by the government, was brought to the brink of collapse last year after racking up huge losses over half a decade. The group suffered from a drop in the uranium price since 2011 and weak reactor sales, but also struggled with the costly delays in key projects.
The shake-up at Areva is part of a wider upheaval in the global nuclear industry as European, US and Japanese reactor makers struggle with weak order books, strained finances and rising competition from Russian, Chinese and South Korean companies.
The EU approval will come just weeks after the election of French president Emmanuel Macron, who appointed celebrity documentary film-maker and green activist Nicolas Hulot as energy minister responsible for overseeing the French nuclear sector.
The government has insisted that it remains supportive of the nuclear industry, which provides about 75 per cent of the country’s electricity and employs about 200,000 people. Mr Macron was the economy minister when the EDF/Areva deal was being put together.
But shares in EDF, which is 85 per cent government-owned, fell sharply following the appointment of Mr Hulot amid fears that he could make the government take a harder line on the sector.
The first stage for the Areva restructuring deal was cleared in January, when the European Commission said the proposed package of French government state aid was in line with rules.
This was on the condition that EDF won antitrust approval for the deal, and that one of its showcase nuclear reactors in Flamanville achieved a positive test result from the French Nuclear Safety Agency.
There has been criticism from rivals, however. Nuclear power producer TVO, which owns the Finnish project, is concerned that after the EDF takeover, Areva might neglect Olkiluoto in favour of the EDF-led projects in Flamanville and Hinkley Point.
The Finnish company is also facing the awkward balancing act of co-operating with Areva to finish the project while simultaneously pursuing the French company and its former partner, Siemens, for billions of euros in compensation for the delays.
A TVO spokesperson said: “TVO is conscious of the importance of the restructuring of the French nuclear industry, but is concerned about the effects of vertical integration on competition in the markets for nuclear technology, fuel and services. TVO would have preferred vertical integration in these markets to have been avoided.”