Areva SAs shares plunged to levels untouched in nearly 16 years after the French nuclear group abandoned its financial targets for the next two years.
The company, 87% owned by the French state, dropped its financial targets for 2015 and 2016, blaming delays of its Finnish Olkiluoto 3 nuclear project, the later than expected restart of Japanese reactors and a lackluster nuclear market.
Areva posted a streak of losses in recent year after the Fukushima explosion in 2011, which prompted nuclear plants to close in Japan and Germany, while the use of shale gas increased in the U.S. European utilities were forced to cut costs to reflect slow economic growth and losses on renewable-energy projects.
In August the company reported a €694 million first-half loss and dropped it forecast to sell 10 EPR next-generation reactors by 2016. The disappointing performance resulted in speculations that the company needs to raise fresh equity or even receive a bailout from the government.
CEO Luc Oursel stepped down last month due to health issues, while Chairman Pierre Blayau is set to be replaced with Philippe Varin, former head of PSA Peugeot Citroën.
“Areva is undertaking a review of its strategic outlook and mid-term funding plan” the company said as it introduced a plan to cut investments and sale fresh assets in an attempt to retain its investment-grade credit rating. Areva also said is releasing a hybrid bond in order to strengthen its balance sheet.
Areva is also held responsible for the delayed construction of a nuclear plant in Flamanville by EDF, a French state-controlled nuclear company. EDF said the launch of the project may be postponed until 2017, due to Arevas inability to deliver a number of parts, like the reactor vessels lid and internal structure.
Earlier this year Areva said that the start date of its Finish reactor, which it runs as a part of a consortium with Siemens, may be pushed back to 2018.
“Further provisions related to the delays on the Olkiluoto 3 and Flamanville reactors cannot be ruled out. It is more than likely that the 2014 net loss will be bigger than the 694 million euro first-half loss” analysts at brokerage Natixis wrote in a note to clients.
Areva SA lost 0.17% on Tuesday and closed at €12.07. On Wednesday the stock dropped 15.82% to trade at €10.16 at 13:36 GMT, marking a one-year decrease of 41.10%. The company is valued at €4.63 billion. According to the Financial Times, the 5 analysts offering 12-month price targets for have a median target of €15.00, with a high estimate of €16.50 and a low estimate of €10.00. The median estimate represents a 24.28% increase from the last close price of €12.07.
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