FLAMANVILLE, France (Reuters) - France moved to shore up its nuclear industry on Wednesday with utility EDF (EDF.PA) agreeing to buy the reactor construction business of state-run peer Areva AREVA.PA for 2.5 billion euros ($2.7 billion).
Loss-making Areva is years behind schedule on projects in France, Finland and China, and the delays have raised concerns at EDF as it lines up Areva to build two new nuclear plants at Hinkley Point in Britain.
The contract signed with EDF clears the way for Areva to raise five billion euros in new capital, largely from the state, as it restructures to focus on uranium mining and nuclear fuel.
“Today marked a new step in the restructuring of France’s nuclear industry which the government is pursuing with determination,” Economy Minister Michel Sapin said.
France has Europe’s largest network of nuclear plants and together EDF and Areva spearhead the country’s export efforts in competition with Russia’s Rosatom and Japan’s Hitachi Ltd (6501.T).
Gregoire Laverne, a fund manager at Roche Brune Asset Management, said the deal was better for Areva than EDF but had been done mainly in the interests of the state, which owns most of the capital in both firms, rather than minority shareholders
“For Areva, it’s a sensible deal, as it will help to reduce Areva’s debt. For EDF, it’s less positive, but it’s a deal that has essentially been pushed through by the French government,” he said.
Laverne does not own shares in either company but said he would consider looking at the restructured Areva as a possible recovery story once its capital increase was out of the way.
Shares in EDF were 1.2 percent lower in afternoon trading while Areva’s shares edged higher.
The price of Areva’s October 2017 FR0011125442= and November 2019 bonds FR0010817452= both edged higher.
Areva has run into trouble with its latest European Pressurized Reactor (EPR) design and is being sued over Finland’s Olkiluoto 3 project which is nine years behind schedule.
In France, work on an EPR at Flamanville is five years behind schedule and the estimated budget has ballooned to more than 10 billion euros ($11 billion) from 3 billion initially.
EDF now wants Areva to build two EPRs at Hinkley Point and Wednesday’s deal is seen as helping it to safeguard the skills and technology needed to deliver the 18 billion pound ($22 billion) project.
“This signature marks an important stage in the refocusing of Areva on fuel cycle activities, our core business,” Areva Chief Executive Philippe Knoche said.
The contracts covering the Finnish project will, however, remain with the Areva after the sale of its reactor construction division to EDF, the companies said.
Finnish utility TVO said on Wednesday it remained concerned as to how the restructuring would affect future resources at the Olkiluoto project, but repeated that the plant was still set to start operations at the end of 2018.
“TVO ... considers that the separation of project ownership from the resources needed for the completion and commissioning (of the plant) is not appropriate behavior from a nuclear technology vendor,” it said in an emailed statement.
TVO and Areva are claiming billions of euros from each other at an arbitration court due to the project’s delays and cost overruns.
Flamanville director Laurent Thieffry told reporters on Wednesday that EDF was sticking to its timetable for the reactor to start operating by the end of 2018, while EDF added that it was looking to cut the costs of future EPR projects.
Additional reporting Sudip Kar-Gupta in Paris, Jussi Rosendahl in Helsinki and Robert Smith at IFR; editing by Jason Neely and David Clarke