Alstom & Schneider / Areva

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Economic patriotism 1. Shareholder value 0. But then it was clear from the start that Paris had a preferred winner in the auction of state-owned nuclear group Areva’s transmission and electricity distribution business. France’s Alstom and Schneider Electric offered €4.1bn, including assumed debt, for Areva’s T&D unit, slightly less than its rivals. They won nonetheless, and their shares were the best-performing French stocks on Tuesday. That should make French taxpayers, Areva’s ostensible owners, see red.

The decision will also disappoint Areva’s unions – which preferred to see the business sold to either of the rival bidders, General Electric or Toshiba. They promised to keep the unit together, instead of splitting it in two as Alstom (which will take the high-voltage transmission operations) and Schneider (the medium voltage distribution business) plan to do. Rounding off the list of the aggrieved, Areva management also disliked the idea. They long wanted the group, which has built almost a quarter of the world’s working nuclear reactors and hopes to construct a third in the future, raise €10bn for future investment via a rights issue. But Paris, which has its own bills to worry about, baulked at the cost of subscribing for its share. So Areva had to sell the unit instead.

As a result of this improvised capital raising, Areva is little nearer to its €10bn goal. The equity value of the T&D sale will bring in €2.3bn – but that will go straight out the door as Areva separately has to buy-out Germany’s Siemens from their nuclear joint venture. Areva can raise perhaps a further €3bn from selling its stakes in publicly owned companies, such as GDF-Suez. The balance is supposed to come from strategic investors, such as Mitsubishi. Given Paris’s decision to prioritise economic patriotism over value creation that will now be a harder sell.

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