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Reuters: Areva to cut wage bill 15% as prospects worsen

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https://www.reuters.com/article/2015/02/27/us-areva-strategy-idUSKBN0LV1IA20150227

Exclusive: Areva to cut wage bill 15 percent as prospects worsen - union sources



By Emmanuel Jarry and Benjamin Mallet

PARIS (Reuters) - French nuclear group Areva (AREVA.PA: Quote, Profile, Research, Stock Buzz) plans to cut 15 percent of its wage bill to save 300 million euros ($337 million) a year within three years amid worsening sales prospects for its reactors, union sources briefed by the new management team said.

However, a complete strategic and financial turnaround plan for the group, which employs some 45,000 people, will not be ready for months, the sources said ahead of Areva's results and strategy update on March 4.

The sources said Chief Executive Philippe Knoche told staff this week the state-controlled company was likely to sell only about a dozen of its EPR reactors in total in the years up to 2030, down from 25 predicted previously.

Areva is weighed down by heavy debt and suffering from an industry slowdown, a lack of orders, and legal troubles over a nuclear installation in Finland.

Areva veteran Knoche and Chairman Philippe Varin, the former head of carmaker Peugeot, were appointed in January to turn the company around.

A takeover of the 87 percent state-owned Areva by much larger power utility EDF (EDF.PA: Quote, Profile, Research, Stock Buzz) -- its main customer and another state-backed group -- is not part of any plan, the sources said, although closer ties are a possibility.

"We won't be merging with EDF but there will some government decisions made around the fact that our two businesses should become official partners," said one union official.

The union sources said the March 4 results would likely offer "broad principles" of a plan but no details, which could be forthcoming by June.

An adviser to Areva said the new management team had not yet found a partner willing to invest capital in the firm.

"Do not wait for a ground-breaking announcement, because there won't be," he said.

Earlier this week, French Economy Minister Emmanuel Macron said a capital increase for Areva was not a priority and ruled out selling state-held shares in EDF and another utility, GDF Suez (GSZ.PA: Quote, Profile, Research, Stock Buzz), to finance support for the group.

His intervention followed Areva's fifth profit warning in seven months in which it said it expected to suffer a 4.9 billion euro ($5.6 billion) 2014 loss, due to writedowns on the value of its assets.

Knoche has told union representatives Areva's shareholders' equity is "close to zero" but added there was no need for an immediate capital increase. Experts mandated by the unions estimate Areva's capital need at 2 to 2.5 billion euros.

Two sources said the 4.9 billion euro loss announced this week includes only about 1.2 billion worth of operational losses, including 700 million on the long-delayed Olkiluoto 3 reactor in Finland. The rest will be write-downs and provisions which do not impact Areva's cash position.

At the end of June, Areva had net cash of 2.3 billion euros and its first major bond repayment is not due until September 2016, which gives management about 18 months to find internal solutions before it would have to ask the state for funds.