State aid: Commission approves restructuring plan of French Areva group

The European Commission has concluded that French plans to grant a capital injection of €4.5 billion to Areva are in line with EU state aid rules. Areva's restructuring plan will allow the company to become viable without unduly distorting competition in the Single Market.

The payment of the state aid is subject to conditions, in particular a positive conclusion of the ongoing tests by the French Nuclear Safety Agency concerning the nuclear reactor vessel of Flamanville III, and an approval of the divestment of Areva's reactor business under EU merger rules.

Margrethe Vestager, Commissioner responsible for competition policy, said: 'Today's decision paves the way for a viable future for Areva based on a sustainable restructuring plan. The plan strikes the right balance between improving the group's competitiveness and limiting distortions of competition created by the public financing.'

In April 2016, France notified to the Commission, for assessment under EU state aid rules, a restructuring plan to restore Areva's competitiveness. The plan provides for various divestments, in particular the group's nuclear reactor business. Areva will instead focus its activities on the nuclear fuel cycle, i.e. the upstream and downstream activities and services involved in the production of electricity from uranium in nuclear power reactors. France plans to help Areva bear the cost of restructuring by injecting public capital in the amount of €4.5 billion.

EU Member States are free to determine their preferred energy mix. The Commission's responsibility under EU state aid rules is to make sure that public financing does not unduly distort competition in the Single Market. To verify this, the Commission opened an in-depth investigation in July 2016. The Commission assessed in particular whether the assumptions underlying Areva's restructuring plan were sufficiently realistic to enable the group to become viable again in the long-term without continued state support.

The Commission's investigation showed that Areva's withdrawal from the nuclear reactor business will allow the group to focus on a clear and profitable business in the nuclear fuel cycle. This is demonstrated by the financial projections of the newly created group.

The complete divestiture of Areva's reactor business will significantly reduce the group's activities in the nuclear sector and thereby limit the distortions of competition brought about by the state support. A competitive Areva will also contribute to ensuring Europe's security of uranium supply.

The Commission also found that Areva will finance a significant part of the restructuring costs with proceeds from planned asset sales, including the divestiture of Areva's reactor business (New Areva NP) to the French energy incumbent EDF. The contribution is subject to the Commission's review of the planned transaction under EU merger control rules. It is also subject to the positive result of tests, performed at the request of the French Nuclear Safety Agency, on the Flamanville III nuclear reactor vessel, which is supplied by Areva. The restructuring aid may not be paid until then. Therefore, the Commission has also approved today a loan amounting to €3.3 billion from the French State to Areva. This loan aims at bridging Areva's liquidity needs until the capital injection can take place.

The French authorities will submit regular monitoring reports to the Commission, to ensure that the restructuring plan is implemented in full and in line with today's decision, until the restructuring period of Areva comes to an end in 2019.

The Commission therefore concluded that Areva's restructuring plan was in line with EU state aid rules, subject to the effective divestment of the group's nuclear reactor business.

Background

Areva is a listed group, of which the French state owns, directly and indirectly, 86.5%. The group is active in the whole range of activities around the full nuclear fuel cycle. The situation of the civil nuclear market post-Fukushima, together with the firm's own structural problems and business choices, led to Areva experiencing serious financial difficulties for over five years.

Companies in financial difficulty can receive state aid only for the objective of restoring their long-term viability. Aid granted to companies in difficulty is highly distortive of competition as it artificially keeps a company in the market that would otherwise have left it. It can therefore only be granted under strict conditions.

In particular, the Commission's 2014 Guidelines on the rescue and restructuring of non-financial companies require beneficiaries to work out a sound restructuring plan that allows them to achieve long-term viability on the basis of realistic assumptions, in order to ensure that they do not continue to seek public aid instead of competing on the market place on their own merit. The plan must include measures to limit distortions of competition arising from the public aid. Furthermore, the beneficiary needs to make a significant contribution of its own to the costs of restructuring. Lastly, the undertaking may receive rescue and restructuring aid only once in any ten-year period.

By ensuring compliance with these conditions, the Commission maintains fair and effective competition between different undertakings and technologies in the energy market, like in other sectors.

The non-confidential version of the decision will be made available under the case number SA.44727 in the State Aid Register on DG Competition's website once any confidentiality issues have been resolved. State aid decisions newly published in the Official Journal and on the internet are listed in the State Aid Weekly e-News.