Areva reduces losses, but difficulties continue

2 March 2017

France's Areva SA on 1 March announced a loss of €665m ($700m) in 2016, compared with a 2015 loss of just over €2bn, noting that it had received no claims from customers following manufacturing irregularities at its Creusot Forges foundry.

Revenues fell to €10.0m from €33m in 2015. Areva is in the process of restructuring ahead of the sale of its reactor business (New NP) to EDF, and said it has now achieved 70% of the €1bn savings targeted in its performance plan. Highlights for 2016 include trimming losses that have plagued the company for five consecutive years, including losses of $5.6bn in 2014. 

Areva said it had achieved critical milestones at the Olkiluoto unit 3 project in Finland, the Taishan unit 1 project in China and the Flamanville unit 3 project in France. In Finland, the milestones included completion of the primary system water filling sequence, full scale simulator tests and open-vessel tests, the company said. In China, reconfiguration of the instrumentation and control system cabinets for Taishan 1 for the start of upcoming hot commissioning tests has been accomplished. In France, Areva has submitted to French regulators the final test results on the reactor's vessel bottom head and closure head (where anomalies were found). However, all three projects remain behind schedule and over budget.

The company recorded €121m in charges related to manufacturing irregularities and document falsifications at Creusot Forge, mainly due to the cost of an audit and of re-manufacturing or scrapping components. Two EDF reactors  have been halted and utilities and regulators in countries including the USA, UK, and China are investigating Creusot-made heavy nuclear components after Areva discovered in 2016 that shortcuts in manufacturing had been covered up in tracking documents. "For now we have had no claims from any clients. We are in talks with the clients and regulators concerned," chief financial officer Stephane Lhopiteau said. The company is in the process of reviewing some 6000 manufacturing tracking documents by the end of this year. 

Areva said corporate achievements for the year included the creation of the NewCo, which will carry forward Areva's ongoing fuel cycle  businesses, including some it plans to sell.  However, Reuters reported that NewCo saw revenue slide to €4.01bn  from €4.17bn in 2015, but thanks to cost-cutting the unit swung into a €440m operating profit. "The markets for uranium, conversion and enrichment remain depressed,"  Lhopiteau warned. Areva also booked a €316m write down on its uranium mines and a further loss of €116m on the Olkiluoto 3. Cumulative losses on that project it now stand at €5.6bn.  Lhopiteau said Areva's planned €5bn two-stage capital increase (including €4.5bn from the state and €500m million from Japan's Mitsubishi Heavy Industries) was scheduled for June. He also said he expected that the sale of reactor unit Areva NP to EDF would happen in the fourth quarter of this year.

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