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Paris - Areva will spin off its nuclear-fuel operations to shield them from the troubled reactor business as the French atomic group prepares to raise €5bn (R85.68bn) to help repay debt.
New Co, to be created in the second half of this year, will target earnings before interest, taxes, depreciation and amortization of about 25% of sales and operating income of more than 10% by 2020, Areva said on Wednesday in a statement.
The business, which includes uranium mining, enrichment and waste recycling, had an order backlog of €33bn (R564.96bn) at the end of March, representing about eight years of revenue, Areva said.
“New Co has strong assets in terms of technology, backlog, skills and performance,” Areva CEO Philippe Knoche said on a conference call. “It will be very well placed for an expected rebound in demand, notably on international markets.”
Areva posted a fifth year of losses in February after the Fukushima disaster in Japan in 2011 sapped demand for nuclear fuel and services and as delays and cost overruns at a plant in Finland compounded the damage. The French government, which controls 86.5% of the company, has pledged to take part in a bailout.
Areva and New Co will hold two separate capital increases totaling €5bn at the start of next year. How the proceeds are split will depend partly on how much debt Areva will transfer to New Co, Areva said. The French state will own at least two-thirds of New Co.
New Co’s cash flow will remain negative in 2016 and 2017 because of ongoing investments to cover future dismantling of nuclear reactors, Areva CEO Stephane Lhopiteau said on the conference call. The company expects positive cash flow from 2018, and it will be used to reduce debt, he said.
Areva expects to raise €2.9bn (R49.68bn) in the planned sales of most of its troubled reactor business to Electricite de France SA in 2017 and other assets such as subsidiary Areva TA and the Canberra unit in coming months, it said.
The company has failed so far to get approval from its Finnish customer to transfer the OL3 nuclear plant contract from Areva NP, the reactor business, to parent Areva SA, the CFO said. Areva is working on a “more complex” solution in which Areva SA would retain the OL3 project and the necessary resources for its completion, he said.
New Co will be able to refinance in 2019-2020, Areva said. The capital increase will help Areva SA meet its financial obligations, including debt repayment, costs related to the completion of the OL3 project, and project guarantees for renewable energy.
