The French government has decided on Philippe Varin, the former chief executive of carmaker PSA Peugeot Citroën, to become chairman of struggling state-owned nuclear group Areva, according to people close to the situation.

The appointment is not due to be confirmed until a shareholder meeting later this year, but is expected to go ahead because the government has an 87 per cent stake in Areva. Philippe Knoche, chief operating officer, it set to become chief executive. Areva declined to comment.

The decision to replace Areva chairman Pierre Blayau, whose term did not run out until 2016, comes in the wake of the resignation last month of former chief executive Luc Oursel for health reasons and a difficult few months for the company.

Shares in Areva have fallen 35 per cent this year amid slow reactor sales, prompted by a combination of fierce competition from US, Russian and South Korean builders and a downturn in nuclear demand following the Fukushima disaster. Areva is also grappling with the French government’s policy switch from nuclear energy to renewables, cost over-runs on key projects and a large debt load.

In September, Standard & Poor’s said it could downgrade Areva’s debt to “junk” status following weak first-half results. The group responded by saying it would cut capital spending and dispose of non-core assets.

The expected appointment of Mr Varin, 62, comes as the government also reorganises the governance structure of Areva, replacing a supervisory board with a board of directors.

This follows a report by the public auditor of management this year that criticised Areva under former chief executive Anne Lauvergeon, particularly in relation to a $2.5bn acquisition of uranium mining company UraMin in 2007. A €1.6bn writedown followed four years later.

Mr Varin was chief executive of Peugeot from 2009 until earlier this year, when he agreed a €3bn rescue package for the carmaker that involved the French government and Chinese automaker Dongfeng both taking stakes in the company.

The departure of Mr Blayau, on which Areva also declined to comment, is the latest in a spate of changes at the top level of the French energy industry, which is having to adapt to weak demand in Europe and increased regulation.

Jean-Bernard Lévy, the former Vivendi chief, is set to officially take over from Henri Proglio as chief executive of EDF this weekend.

Last month saw the board of GDF Suez choose chief financial officer Isabelle Kocher to become chief executive.

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