November 26, 2014 / 1:25 PM / in 4 years

UPDATE 2-Areva chief takes aim at vicious cycle of excessive debt

* CEO says firm has no liquidity problems in short term

* Will start union talks to boost competitiveness (Adds comments on jobs, decommissioning)

By Geert De Clercq

PARIS, Nov 26 (Reuters) - French nuclear group Areva needs to focus on costs and review its strategy, its interim chief Philippe Knoche said on Wednesday, as the group battles a multi-billion euro debt burden and costly problems in the atomic power sector.

The 87 percent state-owned group last week issued a third profit warning in four months and dropped its 2015-16 financial targets, blaming delays to a Finnish reactor, the slow restart of Japan’s reactors and a lacklustre nuclear market globally.

Appearing before a parliamentary committee, Knoche denied Areva had any short-term liquidity problems, saying it had more than 2 billion euros ($2.5 billion) in cash against gross debt of 7 billion euros. He said the group would present a new strategic plan before the end of February.

“We need to get to work from today to get out of this vicious circle of excessive debt,” he said.

Knoche is well placed to become permanent chief executive early next year, having been appointed interim chairman and CEO last month after Luc Oursel’s departure ahead of a restructuring of the firm’s governance structure.

The government has already proposed Philippe Varin, former chief of carmaker Peugeot, to take over as chairman of a new executive board that will replace Areva’s current supervisory board.

Areva’s supervisory board is meeting on Wednesday to draft a list of new board members that will be proposed to a shareholders’ meeting in January, a source with knowledge of the situation said.

The company’s grim prospects were highlighted last week when a credit rating downgrade pushed its bonds into non-investment grade territory.

Asked whether Areva, which employs about 45,000 people, needs to cut jobs, Knoche said that because of international competition and a downbeat nuclear market, Areva needs to boost its competitiveness and flexibility and would start discussions with unions.

He also said Areva wants to accelerate partnerships with companies in Asia and other areas where there is strong growth in both the nuclear and renewable energy sector.

Asked whether Areva plans to use funds reserved for decommissioning its nuclear installations to invest in the project to build two EPR reactors at Hinkley Point, Britain, Knoche said Areva has 6 billion euros worth of decommissioning funds on its balance sheet and the UK investment would be “marginal” in that context.

He also said Hinkley Point did not require Areva’s investment to proceed. (1 US dollar = 0.8017 euro) (Additional reporting by Benjamin Mallet; Editing by Dominique Vidalon and David Holmes)

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