Areva earnings hit by new provision for Finland reactor project

PARIS Wed Jul 24, 2013 3:43pm EDT

PARIS (Reuters) - French nuclear group Areva said first-half earnings were hit by another provision for its troubled reactor construction project in Finland, but the group stuck by its 2013 profit outlook.

Areva said it booked a 150 million euro ($199 million) charge related to the construction of its flagship EPR reactor in Olkiluoto, Finland, which is years behind schedule and billions of euros over budget. Provisions on the project now total about 3.3 billion euros.

Net income fell to zero from 80 million euros in the first half of 2012, while core earnings before interest, tax, depreciation and amortization (EBITDA) fell to 473 million euros from 817 million in the year-earlier period.

But the group on Wednesday confirmed its profit outlook for this year, reiterating its February forecast for a 2013 EBITDA above 1.1 billion euros, based on steady earnings in its core nuclear activities and uranium mining, and despite a difficult business climate for its renewable energy division.

Areva, 87 percent owned by the French state, said first-half sales rose 13 percent to 4.76 billion euros ($6.29 billion).

Its uranium mining business had a strong first half, with sales up 26 percent to 813 million euros as the group signed several long-term contracts with US and Asian utilities.

Mining EBITDA jumped to 315 million euros from 223 million in the first half of 2012 due to higher prices and volumes sold.

Areva CEO Luc Oursel told a teleconference the firm is continuing negotiations with Niger about renewal of its uranium mining licenses there.

Niger's president said in February the country wants to "re-equilibrate" the terms of the deal between Areva and Niger, one of the world's poorest countries, where Areva has mined uranium for four decades.

"The talks with Niger are proceeding in a very cooperative atmosphere," Oursel said.

Areva also mines uranium in Canada and Kazakhstan.

The firm's key reactors business booked EBITDA of minus 110 million euros, from 154 million in the year-earlier period.

Finnish utility Teollisuuden Voima (TVO) said in February it did not expect Areva's EPR reactor to start producing power before 2016, seven years behind schedule.

Areva has never said when it expects the reactor to start and did not mention it on Wednesday either.

Another EPR reactor under construction in Flamanville, France is experiencing similar delays and cost overruns, but two EPRs being built in China are on budget and on schedule.

Areva has not sold a new reactor since 2007, when China Guangdong Nuclear Power Corp in Taishan bought the two EPRs.

In May, the Turkish and Japanese prime ministers signed a deal for a Japanese-French consortium to build a 4,800 megawatt nuclear power plant in Sinop, Turkey.

The consortium would use Areva's "Atmea" reactor, a new design that has never been built before, but has not yet signed a binding contract with Areva.

"Talks about the Turkish contract are ongoing, I expect it will take 12 to 18 months before final conclusion," Oursel said.

In February, Areva's EPR (European Pressurised Reactor) was excluded from a Finnish nuclear tender, after being excluded from a Czech tender late last year, dealing another blow to the reputation of the 1600 megawatt reactor and raising questions about France's ambitious nuclear export plans.

Oursel said Areva is still in the running for several other major nuclear new-build projects.

French utility EDF (EDF.PA) is negotiating with the British government about the construction of two EPRs in Hinkley Point and Oursel said Areva is also participating in another tender with TVO in Finland.

Oursel said he expects nuclear tenders in Saudi Arabia and Poland next year, and the firm is negotiating contracts in China and India. He added that he thinks that South Africa could decide to relaunch its nuclear tender process.

"There are many opportunities, which confirm the dynamism of the nuclear sector in the world," Oursel said.

In 2012, Areva's net loss narrowed to 99 million euros from 2.5 billion in 2011, when it booked a multibillion dollar writedown on its UraMin uranium mines in Africa.

The UraMin debacle, provisions on the EPR and the 2011 Fukushima nuclear disaster have decimated Areva shares.

After setting highs over 80 euros in 2007, they fell as low as 9 euros last year. They have now recovered to about 13 euros, but still trade around levels last seen a decade ago.

(Reporting by Benjamin Mallet and Geert De Clercq; Editing by Louise Heavens and David Gregorio) ꔀ

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