|les Échos- AFP|
Areva's financial statements release: progress in view?
Véronique le Billion in "Les Echos" on February, 28th
In 2015, the group recorded a €2 billion net loss. Its perspectives remain quite blurred
The Finnish EPR in construction can been seen as a « white elephant » in Areva’s financial statements. Friday, the group released a fifth year of loss, whereas it postponed the publication of its 2015 financial statements by a day, in order to conclude its financing for this year.
Last year, this loss amounted to €2,04 billion, among which €905 million were dedicated to new provisions on « OL 3 ». This means a global loss on the Finnish project amounting to €5,5 billion. The commissioning date is still fixed for late 2018. These provisions include for the first time a figure reflecting the progress made in the discussions with TVO, the Finnish client, « in order to settle the basis for the successful completion of the works and the settlement of the dispute », explained Philippe Knoche, Areva’s CEO. Indeed, both parties consider the other as responsible for the 10-year delay of the construction, Areva-Siemens claiming €3,52 billion from TVO, and TVO replies by claiming €2,6 billion. Now looking for an amiable settlement of the dispute, « both parties consider to have reached significant progress », said the group in a press release. Discussions are only « a kind of prerequisite », said Philippe Knoche, still cautious.
« A Finnish-special environment »
The provisions on OL 3 include some operational overcosts on the construction site, together with « an increase of the costs and risks on the test phases » of the reactor, which have just begun and which have taken into account « the return of experiment made during the first trials of Taishan » (the first EPR in trial phase in China) and from the « Finnish-special environment », a kind of implicit reference to the difficult relations with Stuk, the Finnish safety authority.
Beyond 2015 net loss, which takes into account the costs of the present unemployment scheme, the turnover of the « new Areva », centered on the fuel cycle (mining, converting, enriching, retreating used fuels…) increased by 1.9% at constant scope of consolidation and exchange rates, namely €4,2 billion. The turnover of the transferred activities (namely the Areva NP division, but also including the activity of Areva TA : research and defence reactors, Canberra, the subsidiary of measures, the renewables…) is set at €4,01 billion (-8,4%), with new provisions relating to wind and solar agreements.
No turnover forecasts
As the group fights hard for its restructuration, the risk may come from the under-development of its markets, which suffer from an atone demand and overcapacities. Areva has thus given only an objective, namely a level of net cash flow of €-2 and €-1,5 billion. « Because of our present position, we focus on the management of the net cash flow of the activities, and we postpone other directions », justified Stéphane Lhopiteau, Areva financial manager.
Areva has not recorded a turnover forecast this year, nor for the following ones. « In the coming months, we will communicate about our perspectives », promised Philippe Knoche. Even if the book order of the new Areva has recorded an amount equivalent to seven years of turnover (namely €29 billion), it consumes itself quicker than it’s renewed : the amount decreased by 9,7% last year ; in mining particularly « we don’t intend to take as many orders as sales, because of the present price », indicated Philippe Knoche. Nevertheless, the group has revealed that long term agreements were signed with EDF in February, for used fuel retreatment and for uranium conversion and enrichment, for some billions of euros.
For now, Areva’s priorities will consist in notifying its recapitalisation to the European Commission, although its indebtedness has increased by €6,3 billion (+€0,5) and in « progressing » on OL 3 project and on transferring Areva NP to EDF. Then, the group will be able to come back to investors which have expressed their interest in entering in Areva’s capital, like CNNC, from China, or investors from Japan.
Constructive talks between Areva and TVO on OL 3Véronique Le Billion, "Les Échos", February, 19th
According to several sources, Areva and TVO, its Finnish client, are discussing « in an open way »
On January, 20th, Emmanuel Macron, France Economy Minister, said he gave a one-month deadline to Areva and TVO, its Finnish client, in order « to find a possible settlement » for the dispute opposing both companies about the construction of an EPR reactor on the Olkiluoto site, in Finland. A month later, nothing has been yet settled but, according to several sources, discussions are progressing positively. « Each partner intends to settle the dispute and all discussions are made in a positive environment », said a source close to the case. « Discussions are intense. TVO intends to find a solution », adds another source. In Helsinki, at TVO headquarters, no comment is made nonetheless.
Settling the case « OL3 » is of significative importance for the restructuration of the French nuclear sector, which has been in fact necessary because of the quasi bankrupcy of Areva. Indeed, TVO has been awarded a control right on any possible direction change in Areva boarding council, according to the clauses of the turnkey agreement signed in late 2003. But EDF, which is on the verge to buy Areva NP, namely the reactor division, which manages this OL3 agreement, does not want to take responsibility of the project. For some good reasons : the construction has faced a 10 years delay and Areva has already recorded an €4,6 billion of provisions for foreseeable losses on the project.
Seeking a global agreement
In order to boost the restructuration in view, Paris has suggested transferring the OL3 agreement to Areva SA, the holding of the equipment manufacturer. But TVO rejected this option, fearing that the transfer of the ownership of the agreement to Areva NP would hinder the access to the related human and financial resources needed for the construction completion. « Splitting up the agreement from the resources is a significant matter of concern. Completing quickly OL3 should be the main objective of the restructuration of the nuclear sector presently expected in France », explained Lauri Virkkunen, TVO’s CEO, in « les Échos » recently. It seems that discussions help to understand better the expectations of both parties, as this program (OL3 completion) has been still in the core of the incoming measures, which would appoint EDF as Areva’s contractor. The announce of a €5 billion recapitalisation of Areva SA also improves relations between parties. Indeed TVO has no interest in weakening further the image of the French nuclear sector.
The second thorny issue of the case consists in the international arbitration still pending between Areva and TVO, the first, allied with Siemens as partner, claiming €3,52 billion to the Finnish, and in return the Finnish claiming the amount of €2,6 billion from Areva. « Areva is working to find a global agreement with TVO », said a source close to the case.
Presently, it’s not at all sure that discussions will close the subject before Areva’s financial statements release, on February 25th. According to our information, the group shall record some €300 or 400 million of additional provisions on OL3 project accounting for the past fiscal year, which would increase its net loss from €1 billion to €1,5 billion.
The major refit of nuclear power plants arises the concern of the Court of AuditorsAnne Feitz, "Les Échos", February 10th
Wise Men are concerned with the recruiting and training costs arising from EDF investment program and from uncertainties because of the energy transition law.
Highlighting investments in heavy maintenance and in renovation of the nuclear park which shall be supported by the power operator by 2030, this program is of major concern for them, particularly from two points : needs of recruiting and training by 2020, and uncertainties arising from the energy transition law, particularly from the official target intending to reduce the nuclear part in the national energy mix, so that nuclear power would reach 50% of the total (conversely to the present 70%).
In 2011, EDF launched its project « main refit », not only to meet the new safety rules elaborated after Fukushima accident, but also to lengthen the lifespan of its 58 reactors in function, from fourty years to sixty. The power operator has recorded an amount of €55 billion for this program over the 2014-2025 period, and the Court of Auditors has agreed on this amount.
Insufficient involvement of the State
Nevertheless, the Court has highlighted a longer period, namely from 2014 to 2030, where the expenses will reach some €100 billion (€75 billion of investments and €25 billion of operations). The Court considers that these investments won’t impact significantly power price, compared with today’s tariffs. But the Court observes that this price has increased between 2010 and 2013, namely from €49,6 to €59,8 per megawatthour (euro/MWh), to reach a peak at €62,6 per MWh in 2014, « because of the sharp increase of maintenance investments ».
Wise men observe that EDF projects in the nuclear sector, this program included as well as new nuclear power plants in France and abroad, shall need 110,000 new positions by 2020, either direct or undirect positions, among which 70,000 will need the professional A-level to the master level. Although two third of the companies of the sector face difficulties to recruit staff in some specialties, like piping/welding, fittings, or technical consulting.
« EDF has also highlighted a lack of executive resources, whereas training for such positions is quite long », they wrote. They insist in implementing trainings and promoting such trainings, and they regret the present wait-and-see attitude of the State. « The mobilisation of actors is not corresponding to the challenges in course in the field of recruitment and training. The State faces difficulties in implementing the right measures, particularly in the field of training ».
Shut down of some 17 to 20 reactors
The second concern of the Court of Auditors applies to the target, written in the law, to reduce the nuclear part to 50% of the electric mix by 2025. « If power consumption and exports stay at their present level by 2025, this target would entail a reduction by a third of the nuclear production, namely the equivalent of 17 to 20 reactors », wrote the authors of the report, hammering in black and white the main stance hold by various experts, since months.
No valuation has been made about the impact of this law, but this regulation will convey consequences on EDF assets : the loss of yearly revenus will amount to €5,7 billion, the decrease of operational expenses will reach some €3,9 billion, the reduction of maintenance investment will account for €1,5 billion… without taking into account the loss of capital gain on the operator’s asset or the impact on employment.
The Court insists on the need to implement such a valuation, in the framework of the energy comprehensive multi-year program, which shall set the role of the different energy sources, and due to be released in « April or May 2016 ». It is not sure whether such wish will be raised as the Energy Minister, Ségolène Royal, indicated that the program shall integrate « a set of hypotheses, which will lead to different results… »