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France’s Areva Desperately Cutting Costs To Survive

France’s Areva Desperately Cutting Costs To Survive

France’s state-owned nuclear enterprise Areva, coming off four straight years of losses, is focusing its attention on cost-cutting to restore its financial health, but also plans positive steps, including a rededication to its core business of generating nuclear power, expand ties with France’s leading utility and increasing its presence in China.

“We have to cut our costs and master the difficult projects that penalize us financially,” Areva CEO Philippe Knoche told a news conference in Paris on March 4.

Last week the company acknowledged delays in a nuclear reactor it’s been building in Finland, and that it faced more losses from various contracts for renewable energy, leaving it with huge debt. The result contributed to a loss of nearly $5.4 billion in 2014, its fourth consecutive year of annual deficits.

“The scale of the net loss for 2014 illustrates the twofold challenge confronting Areva: continuing stagnation of the nuclear operations and lack of competitiveness and difficulties in managing the risks inherent in large projects,” Knoche said.

Related: The U.S. Will Spend $5 Billion On Energy Research In 2015 – Where Is It Going?

He said Areva would respond by reducing capital expenditures, selling assets and approaching the company’s trade unions to discuss layoffs. This comes despite France getting about 75 percent of its electricity from nuclear power, and Areva being one of the country’s major power sources.

Areva, which is more than 85 percent owned by the French government, has long been considered eminent in the nuclear energy field, involved as it is in everything from designing and building nuclear reactors to creating and recycling the fuels they need to operate. But global interest in nuclear power has withered since the devastating nuclear accident in Fukushima, Japan, in 2011.

To fight this trend, Knoche said he plans to save – and to make – money by focusing more heavily on nuclear energy; expanding Areva’s links with EDF; and increasing its business with China, which has become the world’s fastest growing consumer of nuclear power.

There’s been concern that the government in Paris might have to intervene, either by helping Areva with a cash infusion or somehow merge the company with state-owned EDF, formerly known as Electricité de France, the country’s largest utility.

The government of President Francois Hollande issued an unspecific statement of support. It called France’s nuclear industry “essential for the sovereignty and energy independence of our country” and that the government “places the highest importance on Areva, an essential player in this industry.”

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At the news conference, Knoche said it was too early to rule out negotiations about some sort of link-up with EDF. “Today, talks with EDF focus on operating issues,” he said. “Talks about a capital stake will come later, if necessary.”

The French newspaper Le Figaro asked Industry Minister Emmanuel Macron about a possible EDF capital investment in Areva. He replied that such a partnership between Areva and EDF could be “more industrial cooperation, but could go as far as an alliance, including in terms of capital.”

In addition to its financial problems, Areva has experienced a lack of consistency at the top. Knoche is its third CEO in four years. In October 2014 he succeeded Luc Oursel, who resigned because of poor health and died two months later.

By Andy Tully of Oilprice.com

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