Quotes of the Day

Update Appended: August 7, 2009

This should be Areva's time in the sun. As governments search for clean, renewable energy sources and consumers worry about volatile oil prices, nuclear power is hot again. The fear of nuclear accidents like the one at Three Mile Island in 1979 or at Chernobyl in 1986 has begun to fade as nuclear's backers make their case in a world growing warmer. Nuclear plants, goes their argument, provide a steady supply of relatively cheap energy with zero carbon emissions. The new enthusiasm for nuclear is measurable. Over the next decade, the world is expected to build 180 nuclear power plants, up from just 39 between 1999 and today.

With the long nuclear winter finally over, you might think that execs at Areva, the world's biggest nuclear-energy company, are strutting just now. But you'd be wrong. The state-owned French giant is scrambling not just to rectify a series of snafus at a high-profile reactor it's building in Finland, but also to raise more than $10 billion in new capital and weather the loss of an important industrial partner. All that has raised concerns that CEO Anne Lauvergeon — who fused a disparate collection of firms into the first one-stop-shop nuclear conglomerate, winning plaudits and the nickname "Atomic Anne" along the way — has dangerously overreached. "Areva had built a big lead and a lot of momentum coming into this nuclear renaissance, but the various problems it has encountered, and advances by its competitors, are eating that away," says Alex Barnett, equities analyst in Paris for investment bank and brokerage Jefferies. "No one ever thought Areva was going to be the only player in this, but it needs to respond to remain the dominant force."

Luckily for Areva, it retains a handy lead over its rivals. Created in 2001 when Lauvergeon combined state-owned uranium-mining and fuel-recycling company COGEMA with nationalized reactor builder Framatome, Areva is still the first place that countries or power companies go when looking for all of their nuclear services — supplying and enriching uranium, building and managing plants, disposing of their waste — under a single roof. The Paris-based firm operates in more than 100 countries and employs some 75,000 people. Its order book boasts an impressive $67.5 billion worth of contracts, the most in the business.

It's no surprise that the industry's 800 lb. gorilla is French. Back in the 1970s, when most Western nations reacted to the end of the first oil crisis by forgetting it ever happened, France decided to kick its petroleum habit by pouring money into its young nuclear industry. France now has 59 operational reactors, which generate 80% of the country's electricity and have allowed it to become a net exporter of power.

Areva's rise was built on that national commitment, but the company has also benefited from the ambitions of Lauvergeon, who, as a member of France's civil-service élite, first gained public attention as Socialist President François Mitterrand's sherpa during the 1980s. After taking control of the key state-owned nuclear companies, she merged them to create Areva eight years ago. Her early success in convincing foreign clients that nuclear was the power source of the future earned her a remarkable degree of independence from political meddling. "If you look at what she's done since taking her job, you realize Anne Lauvergeon had the drive, creativity and vision to assemble all these parts into a single unit to be ready for a nuclear renaissance that she saw coming," says Ben Elias, research analyst for Sterne, Agee & Leach in New York. "There are very few CEOs in her league."

A Nuclear World
On paper, at least, Areva is perfectly positioned for the nascent boom. In addition to the 47 new plants under construction worldwide, there are 133 planned for the next decade. Industry analysts predict a further 200 new reactors between now and 2050. At around $7 billion a pop, the payday for the biggest players — Areva, Russia's Rosatom, Toshiba-owned Westinghouse, Mitsubishi Nuclear Energy Systems and a joint venture between General Electric and Hitachi — promises to be huge as countries around the world turn to alternatives to coal and oil to meet rising demand for clean electricity. A reactor currently under construction in Tennessee is the first of at least a dozen nuclear plants planned in the U.S. over the next decade or so. Italy has just reversed a 22 year-old freeze on building new nuclear plants; Rome aims to use nuclear power to help reduce foreign-energy imports, and cut costs by 30% in the coming years. Belgium and Sweden are considering revising laws to extend the life of existing reactors, and to open the door to newer nuclear technology. Britain plans at least four new nuclear reactors, while Japan has two new plants under construction to add to its existing stable of 53. Even the oil-rich Middle East has taken its first step toward nukes: Abu Dhabi hopes to begin work soon on the first of the half-dozen or so reactors it needs to meet the United Arab Emirates' ambitious goal of generating 25% of its energy from nuclear power.

But the driving force is China, whose gangbusters economy requires ever more energy. Beijing says it wants to lift nuclear-generated power from its current 11 gigawatts to 86 gigawatts by 2020 — an increase equivalent to France's current total output. China is already adding 14 reactors to the 11 it operates, including three third-generation installations supplied by Areva and Westinghouse. And it won't stop there: Beijing has signed on for an additional 35 plants to be built over the next decade, and is studying a further 80.

Areva has benefited from nuclear power's second coming as much as any other company. But its 2008 profits — $824 million on $18.4 billion in sales — were down 17% from 2007, due mostly to a whopping $2.4 billion write-down linked to construction troubles with its Finland reactor. The Finnish project was supposed to showcase Areva's third-generation earthquake- and missile-proof design, known as a European Pressurized Reactor (EPR). Areva beat out Westinghouse and General Electric-Hitachi in 2003 to win a contract with Finland's main utility Teollisuuden Voima Oyj (TVO) to build the plant. GE-Hitachi, Mitsubishi and Westinghouse all sell their own third-generation reactors, which are more efficient and safer than previous designs. But Areva's EPR boasts innovations that led the U.S.-based Union of Concerned Scientists to call its design the only one with "the potential to be significantly safer and more secure against attack than today's reactors." Areva spokesman Jacques-Emmanuel Saulnier said the win was crucial to establishing the firm as the leader in advanced nuclear technology. "A nuclear installation is unique, because you can't simulate it on a computer or assemble and operate a prototype in a hangar," Saulnier says. "You only see how it works once you've built it and proved it's what you'd said it would be. "That's why winning the Finnish contract and building the world's first third-generation reactor is so important."

Problems to Fix
Six years on, though, the project is already three years behind schedule, $2 billion over the initial $4.2 billion budget, and the focus of international arbitration and other legal wranglings as TVO, Areva and other companies involved seek compensation for escalating costs. Analysts say many of the problems stem from Areva's impossibly low bid. "Though getting the world's first third-generation reactor completed will give Areva some big advantages over rivals, the Finnish project has cost it a lot in terms of credibility, and a lot of people are looking on saying: 'You mean if you ever complete it,' " says Barnett. "Westinghouse will complete its third-generation reactor in China later, but it will be able to say it did so on time and on budget."

The troubles in Finland probably contributed to German engineering giant Siemens' January decision to pull out of its eight-year partnership with Areva. It has also raised questions about CEO Lauvergeon's management style. Critics accuse her of being better at selling big projects than at executing them. Some suggest her refusal to reconfigure the joint venture with Siemens to give it a direct stake in Areva ultimately convinced the Germans they could do better with another partner.

Worried that Areva may be headed for even bigger problems, the French government, which owns 90% of the company, demanded an internal review earlier this year. French media reports speculated that Lauvergeon could get the heave-ho as part of the evaluation, which looked at finances and strategy. The government was also reportedly upset that Lauvergeon continued to resist pressure from the Elysée to meld Areva with private French engineering company Alstom and private construction giant Bouygues to create a national nuclear megacompany.

Lauvergeon, though, has kept her top spot, with recently appointed supervisor Jean-Cyril Spinetta, chairman of Air France-KLM, backing most of her positions — even if plans for a public offering of shares in Areva, something for which Lauvergeon has long lobbied, have now been dropped. "About the only thing she hasn't gotten her way on is hearing [President] Nicolas Sarkozy say 'O.K., let's float this company,' " Elias says. "Apart from that, though, we're seeing further confirmation that she's one of the best managers in the industrial world."

She'll need all her savvy in the months ahead. Besides getting its Finnish project back on track, Areva's biggest concern is money. The company needs about $14 billion in capital to finance its business for the next several years — and another $2.8 billion to buy Siemens' joint-venture stake. Spinetta's plan calls for the state to sell 15% of Areva to new investors. Leading potential buyers include Mitsubishi — a frequent Areva partner — and Abu Dhabi's flush sovereign wealth funds.

Areva also plans to sell off its shares in a number of smaller French companies as well as T&D, an energy-transmission affiliate that it bought for around $1 billion in 2004, which is now valued at nearly $5 billion and accounts for 20% of the company's profits.

Ambition Meets Competition
Areva boosters say the cash generated by off-loading noncore assets will be used to modernize existing reactors and help build new third-generation plants. And in an industry where experience is everything, the company may even be able to spin the setback in Finland as a valuable learning experience. By focusing on its latest reprocessing technology, which produces less waste, Saulnier says Areva aims to capture one-third of the new reactor construction market by 2030. "Even though 30% of a sector is big, we think environmental concerns, and the energy needs of the world's swiftly-growing population, will fuel robust activity for nuclear power," he says.

But competition is heating up. Siemens now looks set to form a partnership with Rosatom, Russia's main nuclear-energy company and the world's second largest. The move will give the Russian firm new technological and engineering credibility, and mean another strong rival for Areva right in its own backyard. And China's push for nuclear plants is likely to presage competition from that country. "China wants the ability to build its own nuclear facilities in the future," says Nicolas Véron, a capital-markets and foreign-investment expert with Brussels think tank Bruegel. "A large part of [the reason] companies [are] getting the early contracts today," is down to the "agreements of knowledge and technology transfers that will cost them business tomorrow." Nuclear summer or no, that would mean an even more crowded field. Areva still has time to cement its position at the top. But it had better be quick.

The original version of this article included a quote by Areva spokesman Jacques-Emmanuel Saulnier which has been slightly modified.

• Bruce Crumley / Paris
• French nuclear-power giant Areva should be winning in the current climate. Instead, it's fumbling