EC approves EDF takeover of Areva’s New NP

31 May 2017

The European Commission has approved the proposed takeover of New NP, the Areva Group’s nuclear reactor business, by French state-controlled utility Electricite de France (EDF). The Commission had already concluded in January that France’s proposal to grant aid to Areva in the form of a capital injection of €4.5bn ($5bn) was in line with EU state aid rules. It ruled that payment of the aid was subject to certain conditions, including authorisation of the sale of Areva's reactor business to EDF under EU merger rules. Approval of the takeover means that this condition has now been met.

The transaction is part of a restructuring plan to restore Areva’s competitiveness. Areva, which is 87% owned by the government, was brought to the brink of collapse last year after racking up huge losses over half a decade. The restructuring plan includes the sale of the Areva Group’s nuclear plant industrial activities to EDF.

The European Commission (EC), in a statement on 29 May, concluded EDF’s plans to acquire 51- 75% of the capital of New NP would not raise competition concerns. The EC assessed the possibility of the merged company engaging in foreclosure strategies by restricting access to products, equipment and services designed or supplied by New NP. 

However, the Commission said EDF and New NP would not be in a position to push out their competitors from the market for the design and construction of new reactors because of the different market characteristics and the number of suppliers and also the number of nuclear plants not operated by EDF.

Regarding markets for services to existing plants and for instrumentation and control systems, the EC concluded that New NP had "every interest in proposing high-quality products and services to as many potential customers as possible". In addition, EDF "would not be in a position to foreclose New NP's competitors and would have every interest in continuing to source its supplies from a diversified group of suppliers".

With respect to the fuel assemblies market, the Commission said EDF would not have sufficient incentive to source its fuel assemblies solely from New NP. The Commission said the foreclosure of competitors in the European Economic Area “seems unlikely in the medium term” and “would be in breach of existing contracts".

As part of the restructuring, Areva began separating its nuclear fuel cycle activities into NewCo in August last year, combining the Areva Mines, Areva NC, Areva Projects and Areva Business Support companies and their respective subsidiaries. In January, Mitsubishi Heavy Industries (MHI) and Japan Nuclear Fuel Limited agreed on the main terms of their respective acquisitions of 5% stakes in NewCo for €250m ($280m).

Olkiluoto project excluded from the deal

There were some exclusions set for EDF’s takeover of New NP. Areva’s contracts for construction of an EPR at unit 3 at the Olkiluoto NPP in Finland, and for resources required to complete that project, as well as some contracts relating to components forged in the Le Creusot plant, were not included in the sale and will remain Areva’s responsibility. The EC had set as a condition for increasing Areva’s capital: obtaining "favourable conclusions" from the Autorité de Sûreté Nucléaire (ASN – Nuclear Safety Authority), on the carbon content of the steel used in the Areva-supplied reactor pressure vessel for the EPR under construction at unit 3 of the Flamanville NPP in France. Areva expects a decision from ASN around October.

Finnish nuclear utility Teollisuuden Voima Oyj (TVO), the owner operator of Olkiluoto NPP, expressed disappointment that the EC “did not initiate an in-depth investigation" of EDF's purchase of Areva's reactor business. It said the deal would "centralise all nuclear technology, fuel and service businesses into a single vertically integrated company owned by EDF, which is also the world's biggest nuclear operator". TVO said it would "carefully study the 'no issues' approval decision when it is published and decide on its next steps".

TVO also called for the French nuclear industry to "focus on the timely completion" of the Olkiluoto 3 EPR reactor and said the industry must ensure reactor technology, fuel and related services are provided to operators "on a fair and non-discriminatory basis". Construction of the EPR is now nine years behind schedule and the original cost of €3.2bn  has increased to an estimated €8.5bn.

In late September, TVO filed a case at the Nanterre Commercial Court in France against Areva in order to avoid further delays to Olkiluoto 3. TVO was seeking assurances that a restructuring of Areva - including the sale of its reactor business to EDF - would not impact the unit's expected start-up date.

However, following further discussions and the EC approval of Areva’s restructuring, TVO said on 29 May that it had dropped the legal action. "Discussions between the parties opened the door to the withdrawal of this action ... The parties are concentrating on the completion of the OL3 project and the start-up of the power plant," a joint statement said.

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