Wind not a priority in Areva upheaval


February 6, 2015

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Falling demand for nuclear power after 2011’s Fukushima disaster meant last year was tough for Areva. Now, it wants to rebuild.

This week, the French nuclear group and sometime offshore wind turbine manufacturer, said it expected significant losses on new build projects in its 2014 accounts. It did not name specific new builds, but examples are likely to include the Olkiluoto nuclear plant in Finland where it previously reported writedowns of €3.9bn.

It also reported that sales fell 8% over the year to €8.3bn in 2014.

All of this might make you think that the state-run firm is planning to move away from nuclear and focus on sectors including wind. But does that really look viable? In a word: no.

Instead, these figures reiterate how small a part renewables play in the Areva business. In 2014, it recorded revenues of just €52m in the renewable energy division, which is a year-on-year fall of 24.4% due to lower activity in its bioenergy division. This revenue figures also equates as just 0.6% of the company’s total revenue.

We like to focus on its offshore wind operations because wind is our main area of interest. But it isn’t a huge part of Areva’s operations.

This is also a time for Areva to focus on its key business. The firm is in a state of upheaval, with a new management team put in place last month to help the firm manage its debts. Philippe Knoche and Philippe Varin were respectively appointed as CEO and chairman at Areva to lead this approach. They plan to set out a new commercial strategy on 4 March, and we don’t expect wind to feature heavily.

If anything, Areva is moving further away from offshore wind. Need proof? Look no further than its tie-up with Spanish firm Gamesa.

Last July, Areva and Gamesa signed the deal to form a 50:50 offshore wind joint venture. Areva is putting its 5MW turbine M5000, the 8MW cousin it has in development, and a pipeline of 2.8GW of projects into the venture. Meanwhile, Gamesa is contributing its development teams and project management experience.

The initial intention is to maintain the 20% European market share that Areva has already achieved in offshore. This won’t be easy in the face of competition from the likes of MHI Vestas and Siemens, but Areva’s connections should help it win deals in the burgeoning French offshore market. It already won 1GW of deals last April.

But our question is whether this is really a joint venture or, rather, a perfectly packaged way for Areva to offload its offshore control to its Spanish partner. The latter option would make sense. This would enable Areva to meet its existing wind commitments, while also allowing the new management team to fix its nuclear problems.

We will have to wait and see. Whatever, in order for anything to happen, the joint venture needs to be officially inaugurated.

That has been pushed back repeatedly over the last six months – but we now expect something to happen by Easter.

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