The French government said Wednesday that it would support a rescue of struggling nuclear power giant Areva that would include a merger between its nuclear reactor business with Eletricite de France, the utility that is Areva’s largest customer.
It is said to be a match made in heaven, given the opportunity it presents EDF, which is the world’s largest operator of nuclear power plants. On the other hand, this is nobody’s idea of good times for one of France’s flagship industries.
Areva lost $5.3 billion in 2014, its fourth consecutive annual loss in an industry that is experiencing a post-Fukushima Daiichi slump.
Even though the French government owns 85 percent of EDF and 87 percent of Areva, there are still private shareholders to consider. These shareholders could sue the government if it makes a wrong move in the rescue of Areva, The Wall Street Journal pointed out.
French President Francois Hollande's office announced that details of the merger would be worked out in the coming months. Areva’s reactor business represents 40 percent of the company’s revenue. The largest concerns that remain would be Areva’s uranium mining and processing businesses.
The government said it would shore up these businesses with as much capital they required to get them back on into the black.
One official said the idea was go beyond just a quick fix. “The challenge isn't merely to respond to financial difficulties that Areva might encounter, but to restructure the entire sector and give it a new outlook," said a government official who was said to be close to President Hollande.
Shareholders will also be concerned with how much trouble EDF has just inherited. There are major delays and cost overruns at Areva construction projects in Finland and France. There is no guarantee that demand for new reactors will pick up and there is an increasing rivalry from renewable power sources. In the industry, there are formidable competitors from Russia, the United States and South Korea, as well as China, a quickly-emerging player in the international marketplace.