Paris - Atomic energy giant Areva on Thursday agreed to sell a majority stake of its nuclear reactor unit to electricity group EDF as part of a shake-up of the French sector.
EDF said in a statement that the long-time energy rivals “signed an agreement of understanding on June 30” under which the electricity utility will purchase between 51 and 75 percent of nuclear reactor unit Areva NP for an amount valuing the entire affiliate at 2.7 billion euros ($3 billion).
EDF president Jean-Bernard Levy said other potential industrial partners had been contacted about buying minority stakes in Areva.
Meantime, Bernard Fontana, former head of Swiss cement giant Holcim, agreed to take the top spot at Areva, it was announced.
The valuation was less than the four billion euros Areva had sought for the reactor subsidiary, but will provide part of the seven billion in financing Areva says it will need by 2017.
Areva also said it will seek a further 1.2 billion euros in funds through internal financing operations, spending cuts and further assets sales.
But the company acknowledged it will still fall around 3.4 billion euros short of its funding requirements, and will therefore still need “a significant capital increase”, according to company financial director Stephane Lhopiteau.
The company is now expected to focus on its uranium mining and nuclear waste treatment activities, awaiting the necessary cash infusion the French government previously promised as part of its mandated restructuring of the country's energy sector.
Under the accord announced Thursday, Areva and EDF will also regroup their reactor engineering divisions into a merged company.
Once the world-beating, one-stop-shop in the global civil nuclear sector, Areva encountered significant financial problems following the 2011 Fukushima disaster in Japan, as several countries sought to reduce or even eliminate nuclear energy, such as Germany's plans to phase it out by 2022.
Meanwhile, Areva has run into major construction difficulties with its first EPR reactor in Finland, which is now expected to begin operating in 2018 - nine years late, and leaving Areva with a bill for nearly four billion euros ($4.5 billion).
As losses mounted, so did Areva's debt, which reached six billion euros at the end of the first half of 2015.
As a result, the French government has been pushing for greater partnership or a quasi-merger of long-time rivals Areva and EDF to save a nuclear activity that French Economy Minister Emmanuel Macron has called “an industry of the future in France and abroad.”
The French state owns 87 percent of Areva and 84 percent of EDF.
The sale of the nuclear reactor unit to EDF marks the end of Areva's formerly profitable full-service model, which offered clients all aspects of development ranging from conception and construction to fuel procurement and waste treatment.
The agreement protects EDF and Areva NP from any further losses that may arise from the delay-plagued Finnish project, or a troubled EPR reactor being completed in Flamanville, France.
Areva will continue to persue a previously announced internal restructuring plan seeking a billion euros in savings by 2017, and shedding 6 000 of the company's 44 000 global jobs - including up to 4 000 in France.
Following the announcement of the accord, EDF revealed profits of 2.5 billion euros for the first half of the year, 0.2 percent lower than during the same period in 2014.
On Wednesday Areva reported a first half loss of 206 million euros, an improvement on its 694 million loss during the first six months of 2014.