Areva must escape the long shadow of the French state

The paradox of Areva, the French nuclear group, is that it is a world leader in its sector but a company in crisis. So says Philippe Varin, who took over in January as Areva's chairman.

As a former chief executive of PSA Peugeot Citroen, the French carmaker bailed out under his leadership, Mr Varin knows a company in crisis when he sees one. But his elegant turn of phrase about Areva misses something out. First and foremost, Areva is a victim of political intrigue and interference, with a dash of managerial incompetence thrown in for good measure. What is more, these problems go all the way back to the company's formation in 2001.

Among the chief losers in this sorry tale are private investors in Areva. They have little influence because the French state owns 87 per cent of the company and would undoubtedly insist on running the show even if it reduced its stake to 77, 67 or 57 per cent. But Areva's share price has halved over the past 12 months. Its €3.6bn market capitalisation today is smaller than the €4.8bn loss it chalked up in 2014 - and smaller, too, than the group's €5.1bn net debt.

A ray of light might shine through the clouds of confusion that hang over Areva, if only the politicians and industrialists entrusted with its affairs saw eye to eye on how to run it. Instead, larger than life characters such as Nicolas Sarkozy, the ex-president, and Anne Lauvergeon, the former Areva chief executive, fought for many years a kind of low-intensity war against each other, robbing the company of the stability and predictability it needed to flourish.

Even now, the wounds from these skirmishes are visible on Areva - as is shown by the investigation that French financial prosecutors have conducted for the past 13 months into the company's 2007 purchase of UraMin, a Canada-based company. Having paid $2.5bn for UraMin in the mistaken belief, or hope, that it was sitting on large deposits of undiscovered uranium in Africa, Areva eventually had to write down virtually its whole investment. In a laborious search for evidence of criminal offences, the prosecutors have raided its headquarters and, according to their own count, have started to sift through 1m computer files.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Political feuds and the long shadow of the state also explain the conflicting signals this week about whether EDF, the French utility, should come to Areva's aid by merging with it, investing in its reactor business or, more cautiously, limiting its involvement to deeper co-operation on industrial projects. In the end, the government will have the last word on what happens, because it is the majority owner of EDF as well as Areva. But this does nothing, for the moment, to clear up matters.

According to Segolene Royal, France's energy minister, who was speaking on Monday, the government is not ruling out an Areva-EDF merger. According to Emmanuel Macron, the economy minister, who was also speaking on Monday, the government is ruling it out. Perhaps, echoing Mr Varin, we should call it a paradox and leave it at that.

<>But this is no laughing matter for EDF, which has challenges of its own to deal with. In particular, it will have to find tens of billions of euros over the next 10 years to maintain the ageing nuclear reactors that supply three-quarters of France's electricity. No wonder Jean-Bernard Levy, EDF's chief executive, made it plain last month that he did not want to be hustled by the government into making an equity investment in Areva.

For its part, Areva can blame some of its troubles on the downturn in the global nuclear industry that followed the 2011 Fukushima accident in Japan. But that cannot excuse the delays and enormous cost overruns at two nuclear plants under construction in Flamanville, in northern France, and in Finland.

To make a success of such big projects, Areva does not need to merge with EDF. It just needs better managers and fewer politicians sticking their noses in. The history of Areva suggests this is easier said than done.

[email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation