By Inti Landauro
PARIS--French engineering firm Areva SA Monday said it expects
its 2014 net loss to balloon almost 10-fold, as delays to a reactor
project in Finland and low demand for nuclear projects continue to
hammer the company.
Areva's latest profit warning follows three successive years of
reported losses stemming from delays to a nuclear reactor project
in Finland and a major write-off after a mine acquisition went
sour. The company was also struck by the aftermath of the 2011
Fukushima disaster in Japan, when many utilities shelved or delayed
plans for nuclear power plant construction.
Areva, which is 85%-owned by the French state, said preliminary
financial information shows it posted a net loss of around EUR4.9
billion ($5.6 billion), much larger than the EUR494 million loss in
2013. The estimated loss is bigger than the current market
capitalization of Areva, raising speculation as to whether the
French state will need to inject capital into the firm.
French Energy Minister Ségolène Royal told television Monday she
wants Areva to find synergies with state-controlled power utility
Electricité de France SA and the state Commission for Atomic
Energy. "I want the creation of a French nuclear team that would
position itself on international markets to win contracts," she
said. A spokesman for Ms. Royal declined to elaborate.
EDF chief executive Jean-Bernard Levy said last week that his
company is working with Areva to deepen operational links. He added
no capital injection from EDF into Areva is currently being
discussed. An EDF spokeswoman had no additional comment on
Monday.
As well as its project in Finland, Areva said it was
provisioning for future losses related to renewable energies
contracts and liabilities stemming from new regulations on the
decommissioning of nuclear-fuel cycle plants.
The disclosure is the latest blow to Areva, which under-newly
appointed Chief Executive Philippe Knoche is rushing to find a
solution to turn the company around.
"The group is working on developing a competitiveness plan and a
strategic and financial road map which will be the subject of a
specific update on March 4," Areva said.
Areva's challenges began as early as 2005 when it got the
contract to build the Olkiluoto-3 plant in Finland, which included
a newly designed reactor. Capable of powering 1.5 million homes,
and designed to withstand a 9/11-style direct hit by a commercial
airliner, Olkiluoto was to be the flagship of the global nuclear
revival. Instead it has become a symbol of the enormous cost,
complexity and risk of new nuclear projects.
Areva has warned that the plant is now estimated to start
operations in 2018, nearly a decade later than originally planned
and at nearly three times the original cost.
Areva also had to book losses on the ill-timed acquisition of
uranium miner UraMin for around EUR2 billion in 2007 on which it
wrote down EUR1.46 billion four years later.
As it was struggling with those and other issues, Areva saw many
of the world's power utilities freeze commissioning of new nuclear
reactors following the Fukushima disaster.
As Areva's losses have mounted over the past four years,
pressure has been growing on the management.
"The rabbit they will need to pull out of the hat seems to be
getting larger by the day," said James Sparrow, an analyst at BNP
Paribas.
Mr. Knoche is the third CEO to run Areva in four years,
replacing Luc Oursel, who took a leave of absence last October,
citing poor health. Mr. Oursel died in December.
Areva has already released three profit warnings since mid-2014,
weighing heavily on its shares, which have lost almost 40% since
then, leaving its current market value at about EUR3.7 billion.
Areva's audit committee said it disclosed the potential loss on
Monday a week ahead of its official earnings announcement after
speculation in the press on the size of its losses.
Write to Inti Landauro at inti.landauro@wsj.com
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