In a sense, Areva is already dead. The giant French nuclear group, created thirteen-and-a-half years ago in September 2001, has just foundered on the rocks of its own errors and losses. Even if it survives, even if it keeps its name and some of its current activities, the group will never be the same again. The announcement on Wednesday March 4th that it had lost 4.8 billion euros in 2014 – which comes on top of 500 million euros lost in 2013 and 2.4 billion euros in 2011 – brings to a definitive end Areva's ambitions to be the world's leading nuclear player.
Yet despite the anguished tone of some newspaper editorials, this industrial and financial disaster was only a shock for those who had preferred to look the other way. For the story of Areva is that of a catastrophe foretold. It was not the tsunami-induced disaster at Fukushima in Japan followed by a world-wide retreat from nuclear that are at the origins of Areva's setbacks. This downturn has simply exposed the group's existing internal problems.
Indeed, Areva has not had an operating profit since 2007. To put it another way, the group, which is 87% owned by the public body the Commissariat à l'énergie atomique et aux énergies alternatives (CEA) and the French state directly, has been eating up cash to carry on operating. And all the signs of serious industrial, financial and strategic failings have been piling up since 2009. Yet from the Elysée to the French finance ministry, not forgetting the group's supervisory board and its auditors, everyone in a position to ask questions has opted either to simply show collegiate loyalty towards fellow public servants at Areva or to play politics. And all preferred to close their eyes to the problem.
After 2009 people familiar with the group's operations were no longer under any illusion: the EPR, the third generation pressurized water reactor that was supposed to be at the heart of Areva's strategy, was in the process of turning into a fiasco. It was not just the delays in building a reactor on Olkiluoto Island in Finland, which at least has the excuse of being a prototype, which have caused a problem. Areva has also had difficulties in the construction of a new nuclear plant at Flamanville in north-west France and, to a lesser degree, in China too.
All these problems, which were for a long time swept under the carpet, have ended up making an appearance in the latest accounts. The group has made provision for a 1.4 billion euro depreciation in its nuclear assets and more than a billion euros in losses over the completion of the construction of the three EPR reactors. The Finnish project alone cost 700 million euros in additional losses in 2014. The overall bill for the Finnish reactor has already reached more than 8 billion euros though it was sold to the Finns for 3.5 billion euros. And it is still not yet finished. The EPR reactor there is not now due to be ready until 2018. “Each year of delay costs Areva 400 million euros,” explains a former employee at the group.
Though the scale of the financial problems at Flamanville is not as great as at the Finnish project, it is still a cause for concern. The EPR there should have been in action in 2012 but following delay after delay it is not now expected to be in service until 2017. Already the cost of the build has topped 8.5 billion euros, three times more than originally forecast. The cost per megawatt hour (Mwh), which at the start was estimated at 46 euros, is now put at more than 116 euros. “As it is currently conceived the EPR will never be profitable,” says someone who knows the issue well.
For a long time the desire to cultivate a prickly independence - carefully put in place by the former president of the group Anne Lauvergeon with the help of showy public relations and highly-publicised confrontations and plots - a management that covered everything up and political silence about “one of France's technological shop windows”, all combined to make it difficult to appreciate the scale of the difficulties. It is only since 2013, once relations between Areva and its main client, electricity producer EDF, had become calmer, that the two groups have started to work together again and have begun examining the EPR dossier from the beginning. How many millions or even billions were wasted over turf wars, or in the stroking of egos?
During this period the group exhausted itself financially to pretend that all was well. Everything possible was done to hide the true situation. From 2008 the group began selling some 7 billion euros of assets in a bid to bail itself out. But in vain. Then in 2013 it offloaded part of its strategic stocks, selling off 42% more uranium than in 2012 with the aim of being able to show slightly more presentable results. This sleight of hand could not be repeated in 2014. Following new depreciations in its mining assets, in particular those linked with the Uramin scandal, the group's mining operations posted an operating loss of 73 million euros in 2014, against a profit of 499 million euros in 2013. Up until then it had been the only one of the group's businesses that had been profitable.
This indeed is Areva's other great disaster. Not only has its flagship reactor business gone badly wrong, but so have all its other activities, those which were supposed to have justified the structure of a group that followed the entire nuclear process from mining to the treatment of nuclear waste. This set-up was supposed to give the group a solid basis and protect it in case of difficulties during a cyclical downturn. For some of the sectors, such as the treatment of waste, the current difficult patch is perhaps just short-term. But for others the situation looks much bleaker.