February 23, 2015 / 8:00 AM / 3 years ago

UPDATE 3-Areva warns of 4.9 billion euro loss ahead of new strategy plan

(Repeats to additional subscribers)

* Areva issues fifth profit warning in seven months

* New management team to present strategy on March 4

* 4.9 bln euro loss due to Olkiluoto and other writedowns

* First major bond repayment due Sept 2016 (Adds energy minister comment, possibility of dissolution)

By Geert De Clercq

PARIS, Feb 23 (Reuters) - French state-controlled nuclear group Areva expects a 2014 net loss of about 4.9 billion euros ($5.6 billion), hit hard by charges on assets including a much-delayed reactor in Finland.

Areva’s profit warning on Monday, the fifth in seven months, comes ahead of the presentation of a new strategy to reduce debt and restore profitability on March 4 when Areva releases detailed results for last year.

CEO Philippe Knoche and Chairman Philippe Varin, appointed in January, will lay out how Areva can survive an industry slowdown following the 2011 Fukushima disaster and fierce competition from Russian, Japanese and South Korean firms.

They also need to find a solution for Finnish reactor Olkiluoto, years behind schedule and way over budget. Areva and its Finnish customer Teollisuuden Voima have lodged claims worth billions of euros against one another in the International Chamber of Commerce’s arbitration court.

Energy Minister Segolene Royal said on Monday France is studying all options for 87 percent state-owned Areva and wants closer cooperation between state-owned energy firms.

“We want to create a strong nuclear industry by creating synergies, and this is very new, between Areva, EDF and state nuclear energy agency CEA,” she told reporters.

Two weeks ago, EDF said there is no question about making a financial investment in Areva.

Knoche and Varin will also need to cut Areva’s debt, which stands at 5.77 billion euros according to Thomson Reuters data.

With a 975 million euro bond due in September 2016, the new team has at best 18 months to cut costs and sell assets before it could be forced to ask the state for new capital. Some think it could be sooner.

“The new loss is bigger than Areva’s market value. This will force Areva to announce a new capital increase soon,” John Plassard of Mirabaud Securities told Reuters.

Since the loss would also be bigger than Areva’s shareholders’ equity, it could also be large enough to force the firm into convening an extraordinary general meeting to decide on its possible dissolution.

JUNK STATUS

At the end of June, Areva had net cash of 2.3 billion euros and undrawn credit lines of over 2 billion, but raising capital in the market is virtually impossible, as Areva’s debt was downgraded into junk territory in November.

Its shares are down 55 percent over the past 12 months and fell another 1.5 percent on Monday.

With few non-core assets left to sell, Areva will have to make painful choices. These could include ditching the firm’s business model of an integrated nuclear group that mines uranium, makes nuclear fuel, builds reactors and reprocesses nuclear waste.

Given the delays on Areva’s EPR reactors and the fact that EDF is one of the few customers left for waste processing, Areva’s mining business is virtually its only marketable asset. It could interest China, which has the world’s largest nuclear construction programme.

Unions also fear job cuts at Areva, which employs 45,000.

“It looks like the new plan will involve salary reductions and job cuts,” said Bruno Blanchon of the CGT union.

Areva said on Monday new impairment charges included its uranium conversion plant Comurhex II plant in southern France and warned of further provisions on renewable energy contracts. ($1 = 0.8798 euros) (Additional reporting by Emmanuel Jarry, Alexandre Boksenbaum-Granier and Julien Ponthus in Paris and Robert Smith in London; editing by Keith Weir)

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