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* Auditor questions merit of Areva's one-stop-shop model
* Report says hard to make money selling reactors today
* Areva suffers as EDF diversifies fuel purchases
By Geert De Clercq
PARIS, May 13 Shares of state-controlled nuclear
group Areva fell nearly four percent after France's
top public auditor criticised the company's business model and
its and former management.
The "Cour des Comptes" gave a withering review of the
management of Areva's former chief, Anne Lauvergeon, in a report
focused on the 2006-2012 period.
The report, published by French daily Les Echos late on
Monday, criticised Areva's 2007 acquisition of uranium mine
UraMin, on which it had to write down 1.9 billion euros; a 3
billion euro loss due to delays and cost overruns on a reactor
in Finland; and Lauvergeon's exit deal when she left Areva in
June 2011, which it described as excessive.
The report also questioned Areva's one-stop-shop business
model. Lauvergeon built Areva into an integrated nuclear group
that offers a full range of nuclear activities from uranium
mining, enrichment and nuclear fuel to building and servicing
reactors and recycling spent fuel.
"The integrated model is built on the idea of synergy
between fundamentally different but complementary activities. In
reality, this notion is not as clear as it seems," it said.
Other nuclear groups, such as Mitsubishi Heavy,
Toshiba Corp's Westinghouse, GE Hitachi
, and Korea's Kepco, focus on building
reactors and are not involved in mining, fuel or recycling.
Only Russia's state-owned Rosatom sells fuel and recycling
services with its reactors and often operates them.
"It is hard to define the advantages and inconveniences of
the integrated model. Its strongest argument, notably that it
would offer a commercial advantage, is not convincing, as
customer expectations and contract types can be very different,"
the report said.
The auditor said that in the current competitive context, it
is difficult to make a profit on the sale of nuclear reactors,
which is the firm's core business.
It said Areva is forced to chose between fully accounting
for its development costs and risk margins, which could limit
success winning future tenders, and an aggressive commercial
approach that could durably impact its financial equilibrium.
"FIVE QUESTIONS A DAY"
The auditor said in a statement the report was provisional
and confidential and that its investigation into Areva had not
yet concluded. Areva declined to comment.
"The report paints a worrying picture of Areva's health,
which revives old worries about the governance of the firm,"
said a Paris-based equity trader.
The audit said that, with the exception of its mining and
renewable energy business, Areva's financial track record for
big projects was not satisfactory.
"The numerous cost overruns indicate optimistic forecasts
and insufficient anticipation of difficulties," it said.
It said that Areva's fuel business was suffering as its
principal client, state-controlled utility EDF, tries
to secure stocks and lower prices by turning to other suppliers.
Lower sales to EDF have not been compensated by new contracts
with foreign clients, the audit body said.
Lauvergeon was not available for comment, but according to
the transcript of an April 14 hearing obtained by Reuters, she
told the auditor she had built Areva into the world's number one
She said that decisions such as the UraMin purchase had been
taken collectively and under the tight control of French state
holding company APE. She also said that her successor Luc Oursel
had been a member of Areva's executive committee since 2007.
"Concerning APE's supervision, nothing escaped them. They
asked five questions per day on average and wanted that
absolutely everything be forwarded to them," she said.
(Additional reporting by Alexandre Boksenbaum-Granier and
Benjamin Mallet, editing by Louise Heavens)