The French government could be required pay as much as €5bn to rescue the struggling state-controlled nuclear group Areva as part of a deal that is set to reshape the country’s energy sector.
Areva and EDF are in the midst of tense, last-minute discussions ahead of key board meetings on Wednesday, where the two groups — both more than 85 per cent owned by the state — need to find a wide-ranging agreement.
The negotiations, which concern the price EDF will pay for Areva’s reactor businesses and fuel treatment contracts, will shape how much France’s cash-strapped state has to put in to recapitalise Areva.
People close to the talks say that the government could be forced to contribute as much as €4bn-€5bn to a capital raising expected in September, far more than the €2bn-€3bn that ministers had hoped for just a few months ago.
Relations between EDF and Areva are strained. Philippe Varin, Areva’s chairman, last week wrote a letter to the government warning that the whole deal was in danger of falling apart.
The two companies, which both report half-year results on Thursday, need to agree on the price for Areva’s reactor unit, called Areva NP.
According to people close to the talks, the expectation is that the unit will be valued at about €2.7bn, more than the €2bn expected last month, but EDF, which operates France’s 58 nuclear plants, will take only about 75 per cent of the equity in the company.
This would leave Areva with a 25 per cent stake of Areva NP. But then it would receive roughly €700m less cash, and the shortfall would probably need to be made up by the state in the capital raising, according to those same people.
Even more tense negotiations are under way over a number of commercial contracts between EDF and Areva, chiefly over the price that EDF will pay for fuel treatment and recycling until 2023.
People close to Areva say that the price being offered by EDF is too low. The French state also has an interest in EDF paying a higher price for this major contract, as more revenue could lead to lower capital needs for Areva.
The third part of the talks is over whether the French state will indemnify both Areva and EDF against any future losses on a construction project in Finland, which has already cost Areva €3.9bn in impairment charges.
Areva has over the past five years suffered from delays to key projects as well as a slump in global demand for new reactors following the 2011 Fukushima disaster.
The company reported a €4.8bn loss last year, prompting the government to step in to try to broker a solution with EDF to save a key player in one of France’s most important strategic industries.