Two-step solution sought to lift Areva capital

By Peggy Hollinger in Paris
Published: June 12 2009 22:31

The French government is leaning towards a two-step solution to resolve the urgent need to raise capital for Areva, its state-owned nuclear power champion.
The nuclear group is likely to be asked to sell its profitable power transport and distribution equipment (T&D) business in a first step this summer that could raise €3bn-€5bn ($4bn-$7bn).

However, the long-awaited capital increase to bring in new strategic investors is likely to come later this year, according to several sources close to the subject. “The aim is for this to happen in a second stage,” said one. However, they said the final decision had not yet been taken by President Nicolas Sarkozy, who sees the group as a launchpad for France’s nuclear ambitions abroad.
The government has been waiting for the strategic review, completed this week, by Areva’s newly appointed chairman Jean-Cyril Spinetta. Areva insiders said the group was resigned to losing the T&D business, without which it would have fallen into losses last year. The unit supplies equipment and services for electricity distribution and transmission.
The sale process could be launched quickly, possibly even by the end of the month. Though France’s Alstom has declared an interest, there could be greater synergies for bidders such as Schneider, the French electrical components group, GE of the US or Germany’s Siemens. There is also the possibility that some contenders could join forces for a bid.
However, Anne Lauvergeon, Areva’s chief executive, will be disappointed by indications that the government favours another delay in launching a capital increase.
Areva has argued that it faces investment demands of some €12bn to 2012, and it must find a further €2bn to buy out Germany’s Siemens from their long-standing engineering joint venture, Areva NP.
Ms Lauvergeon favours a capital increase to fund Areva’s commitments, but Paris is not willing to inject more state funds. Instead Areva has been forced to sell non-core assets.
The government is ready to open up Areva’s share capital to strategic partners, such as Japan’s Mitsubishi Heavy Industries or Middle Eastern sovereign wealth funds. It could also ask Total to increase its existing 1 per cent stake.
The oil group has ambitions to expand in the nuclear sector and could be persuaded to boost its investment to as much as 3 per cent.
Copyright The Financial Times Limited 2009