Areva's Field of Dreams

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. (Read: "Siemens Sues Its Own Managers.")

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. (Read: "Abu Dhabi: An Oil Giant Dreams Green.")

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.

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