Areva: France’s Uranium Giant

By Melissa Pistilli-Exclusive to Uranium Investing News

In its latest step towards remaining at the forefront of the global nuclear power revival, the French government is strengthening its presence in the nuclear sector around the world.

French President Nicolas Sarkozy headed a business delegation to the Democratic Republic of Congo (DRC) on Thursday that included uranium and nuclear giant Areva SA. The state-controlled company signed a deal to develop uranium mining in the DRC’s southern Katanga province.

Created in 2001 when uranium miner Cogema merged with reactor maker Framatom, Areva is one of the world’s three leading uranium producers, which accounts for 25 percent of its sales. The French company, of which the government owns 93 percent, is also the world’s largest nuclear reactor maker and has nuclear projects underway in Finland, France, China, India, Italy, the UK and the US. In 2004, Areva purchased energy and transportation giant Alstom’s power transmission and distribution unit (T & D).

Areva CEO Anne Lauvergeon, who’s held the position since 2001, was ranked number 9 in Forbes magazine’s world’s most powerful women in 2008. Lauvergeon signed the uranium exploration agreement with Congolese Mines Minister Marting Kabwelulu. “By its size and geological profile, the Democratic Republic of Congo offers significant uranium potential,” said Areva.

Partners with India’s Nuclear Power Corp.

Areva has recently partnered with India’s state-run energy producer Nuclear Power Corp. to build the nation’s first large-capacity plant to use overseas equipment after the removal of the global nuclear-trade ban in 2008. The new facility will be located at Jaitapur in western India and will help the country in its plans to add 60,000 megawatts of nuclear capacity by 2032. Nuclear Power has already agreed to purchase two Areva reactors each with 1,650-megawatt capacity and is considering an additional four reactors. Lauvergeon has said Areva will supply Nuclear Power with enough uranium to operate their plants for 60 years.

Applies for License in Idaho

Areva is planning to build a multi-billion dollar centrifuge uranium enrichment facility in Bonneville County, Idaho. The Nuclear Regulatory Commission has accepted the French company’s application, which it submitted in December. The review and hearings process will take at least 30 months. If approved, Areva plans to begin construction in 2011.

Seeks to Build Central Processing Facility in Argentina

Areva is currently researching the prospect of building a central milling facility in southern Argentina and is in talks with several companies operating in the region, including Urex Energy Corporation. The facility would require a minimum uranium reserve of an estimated 22 million pounds of ore. The idea is to meet this requirement by partnership with surrounding uranium mines operated by different companies.

Funding Problems?

Besides remaining amongst the top three uranium miners in the world, the company’s goals include developing at least 100 new nuclear reactors by 2030. But, reports are circulating that Areva is heading toward a serious funding shortfall if actions aren’t taken soon. Options such as raising money by selling investments or bringing new knowledgeable investors on board may not be sufficient enough to finance the company’s medium-term ambitions, analysts say. The sale of Areva’s highly profitable T & D unit, which Alstom has said it would like to buy back, or a merger are more suitable options.

However, management is opposed to such actions. “A sale of T&D would make a lot of sense,” said Jefferies International analyst Alex Barnett. “Anne Lauvergeon is opposed to it, but I don’t know if the state is as opposed as her.” Jacques-Antoine Bretteil, International Capital Gestion fund manager, has said the issue is highly political. “Any decision, whatever it is ultimately, will be made at the highest level,” he said.

“Areva cannot stay alone, so I think there will be a tie-up, either with Alstom or with Total, which is now looking at the nuclear sector,” said Bretteil. “The state will look at all the options allowing it not to dip further into its pockets.” The option of a merger with a company such as Alstom has also faced opposition from Areva CEO Lauvergeon. Nevertheless, the French government does have the power to override Areva’s management and effect a merger.

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