Areva cuts 6,000 jobs ahead of rescue plan

French nuclear group Areva is to cut 6,000 jobs over three years - 14 per cent of its global workforce - as options for a government-backed rescue package begin to narrow.

Areva, which reported a €4.8bn loss last year, said it was also lowering wages for surviving staff in an attempt to deliver the bulk of a €1bn cost reduction target.

However, the state-controlled group, which has seen its equity capital fall to nearly zero after four years of losses, is continuing to negotiate an even more radical restructuring plan with Electricite de France and the French government.

Sources close to the discussions said that these talks now focus on just two remaining options, and a final decision will be made in the coming months.

Under the first option, EDF, which is 85 per cent government owned, would acquire the nuclear reactor and engineering businesses of Areva, taking control of the process of designing and building new reactors as well as maintaining existing plants.

This deal, which could be worth as much as €3bn, would result in the break up of Areva, a company once regarded as one of the crown jewels of France's nuclear industry. But, at the same time, it would limit the amount of cash the state has to contribute to Areva in a capital raising, which is expected to accompany such a deal.

Under a second, simpler, option - which people close to the talks say is preferred by the managements of Areva and EDF - only the smaller engineering business of Areva would be sold to EDF.

This would keep Areva relatively intact but, with EDF paying only between €300m and €1bn, it would necessitate a much bigger capital contribution from the cash-strapped French government to Areva.

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To help mitigate the cost to the state of any capital raising, Areva will consider approaching its existing Chinese partners, according to people familiar with the plans.

Philippe Varin, the Areva chairman, was the former head of PSA Peugeot Citroen, where he negotiated a €3bn rescue package involving Chinese carmaker Dongfeng and the French government.

However, people with knowledge of the government's thinking said the state would ultimately decide the course of action, as it owns the majority of both Areva and EDF.

"The state needs to decide the best way to preserve one of the country's great industries," said one person familiar with the talks.

Areva, which has not sold a new nuclear reactor since 2007, has been grappling with fierce competition from US, Russian and South Korean companies in recent years - a time of weaker demand for nuclear energy following the Fukushima disaster in Japan.

It has been hit by vast cost overruns on its flagship Finnish Olkiluoto 3 reactor, which is due to come online in 2018 - some 10 years behind schedule. Areva has so far taken €3.9bn of impairment charges on the project.

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