Half Year Financial Report June 30, 2009

Transcription

1 Half Year Financial Report June 30, 2009

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3 Contents 1 Person responsible Person responsible for the half-year report Certifi cation of the half-year report by the person responsible Half-year business report Signifi cant events Summary data Segment reporting Backlog Income statement Review by division Cash fl ow Balance sheet items Events subsequent to closing Outlook Statutory auditors report on the fi nancial information for the 2009 half-year period January 1 to June 30, Condensed consolidated fi nancial statements at June 30, Consolidated income statement Consolidated comprehensive income Consolidated balance sheet Consolidated cash fl ow statement Consolidated statement of changes in equity Segment reporting Notes to the consolidated fi nancial statements for the period ending June 30, This is a free translation into English of the AREVA group's Financial Report for the fi rst half of 2009, which is issued in the French Language, and is provided solely for the convenience of English speaking readers.

4 General notes This fi nancial report contains statements on the objectives, prospects and growth areas for the AREVA group. This information is not historical data and must not be taken as a guarantee that the facts and data set out will be realised, or that the objectives will be attained. The statements of prospects in this fi nancial report also address known and unknown risks, uncertainties and other factors that may, if they happen, have the effect that future income, performance and achievements of the AREVA group might be signifi cantly different from the objectives set and put forward. These factors may in particular include changes in the international economic and commercial environment and the risk factors set out in the 2.1 section. AREVA has no obligation to update the information on prospects contained in this document, subject to the ongoing disclosure obligations applicable to companies whose stock is admitted to trading on regulated markets. 2 AREVA Half-year report June 30, 2008

5 1 Person responsible 1.1. Person responsible for the half-year report Mrs. Anne Lauvergeon, Chief Executive Offi cer of AREVA 1.2. Certification of the half-year report by the person responsible I certify, to the best of my knowledge, that the summary accounts for the fi rst half of 2009 are prepared in accordance with applicable accounting standards and give a true and fair view of the net worth, the fi nancial position and the income of the company and all the companies included in consolidation, and that the half-year fi nancial report attached presents a fair view of the major events that occurred during the fi rst six months of the fi scal year, of their effect on the fi nancial statements and of the main transactions between related parties and gives a description of the main risks and main uncertainties for the remaining six months of the fi nancial year. Paris, August 31, 2009 Mrs. Anne Lauvergeon Chief Executive Offi cer of AREVA AREVA Half-year report June 30,

6 2 Half-year business report 2.1. Significant events Highlights of the period Concerning business strategy and shareholding structure The AREVA Supervisory Board appointed Jean-Cyril Spinetta as Chairman, replacing Frédéric Lemoine, who resigned. AREVA announced that it had decided to open up its capital to strategic and industrial partners to the value of 15% mainly by increasing its capital. This increase will be open to investment certifi cate holders. The group is also launching an employee shareholders program. The AREVA Supervisory Board asked the Executive Board to put the Transmission & Distribution (T&D) division of the group up for sale. An open call for bids was launched and the group will pay special attention to the price offered and also the industrial and labor projects. Depending on the interest generated, the decision to dispose of the T&D division or not and the choice of a potential buyer will be taken before the end of the year. AREVA is considering disposing of its holdings in ERAMET and STMicroelectronics. These holdings will in any case remain in public ownership, because of their strategic nature. Siemens advised AREVA of its decision to exercise the option to sell Siemens' 34% holding in AREVA NP. In accordance with the shareholders agreement of January 30, 2001, this notifi cation will take effect at the latest on January 30, Furthermore, this agreement lays down the procedure for valuing the shares to be sold. Siemens announced the signature of an agreement on the formation of a joint venture in the nuclear fi eld with Rosatom. AREVA signed a mining agreement with the government of Niger granting it an operating permit for the Imouraren mine. The agreement provides for a split in share capital of 66.65% for AREVA and 33.35% for the Government of Niger in the company formed to operate the mine. AREVA signed a cooperation agreement with the Democratic Republic of Congo for future uranium prospecting and mining. AREVA signed an industrial agreement with the Republic of Namibia providing for the creation of a joint mining exploration company for future uranium operations. AREVA signed an agreement with the Japanese companies Kansai and Sogitz on taking a 2.5% stake in the holding company of the "Société d'enrichissement du Tricastin" (SET), the company operating the Georges Besse II enrichment facility. AREVA and KHNP signed an agreement on this South Korean power company taking a 2.5% stake in the holding company of the "Société d'enrichissement du Tricastin" (SET), the company operating the Georges Besse II enrichment facility. AREVA and USEC signed an agreement to bring an end to the dispute between them that had lasted for over 7 years over the supply of French enrichment services to the USA and to the allegations of dumping made by USEC. Mitsubishi Heavy Industries (MHI), AREVA, Mitsubishi Materials Corporation (MMC) and Mitsubishi Corporation (MC) signed a shareholders agreement on the formation of a joint-venture specialised in manufacturing and marketing nuclear fuel. AREVA and the Nuclear Power Corporation of India Limited (NPCIL) signed a memorandum of understanding on initiating technical cooperation between NPCIL and AREVA to work on the installation of two to six EPR reactors at Jaitapur. It also covers supply of fuel throughout the life of these reactors. The President of the French Republic announced the construction of the second EPR reactor in France. This new reactor, for which construction is due to start in 2012, will be the world s fi fth such project after Olkiluoto 3 in Finland, Flamanville 3 in France and Taishan 1 and 2 in China. The utilities ENEL and EDF announced their intention of jointly developing a fl eet of at least four EPR reactors in Italy. AREVA, Duke Energy and UniStar Nuclear Energy entered into negotiations to build an EPR reactor in Ohio. AREVA and the Russian company VNIAES signed a cooperation agreement in the safety instrumentation and control fi eld. AREVA signed a memorandum of understanding with Wetfeet Offshore Windenergy for the supply of 80 M5000 wind turbines for the Global Tech I offshore wind farm for a value of over 700 million euro. 4 AREVA Half-year report June 30, 2008

7 Half-year business report 2.1. Signifi cant events 2 In the industrial arena The President of the Republic of Niger and Anne Lauvergeon laid the fi rst stone of the Imouraren mining complex. AREVA unveiled the fi rst centrifuge cascade of the Georges Besse II uranium enrichment plant where production is set to commence this year. In support of its vigorous international expansion, AREVA announced plans to increase production capacity at its Chalon/Saint- Marcel facility in France. The new capital expenditure to be committed in the next few years will increase annual production capacity from the current level of around 1.7 EPR equivalent to 2.7 on average. AREVA unveiled eight Transmission and Distribution facilities on three industrial sites in India. These new facilities mark the successful close of nearly 150 million euro investment, driven by growing demand for electrical equipment and services in the Indian market. In the commercial arena The contracts signed during the half-year and recorded in the backlog at the end of June 2009 are listed in section 2.7 (Review by division), under fi rst half 2009 performance Transactions with related parties Details of the main transactions with related parties are given in Note 14 to the Notes to the Consolidated Financial Statements for the half-year Risk factors The signifi cant risks and uncertainties that the group faces are set out in Section 4 "Risk factors" of the 2008 Reference Document, fi led with the Autorité des Marchés Financiers and available on its website ( and also on the Company's website ( This description of the main risks remains valid at the date of publication of this Report for the evaluation of major risks and uncertainties that may affect the group at the end of the current fi nancial year, and no signifi cant risks or uncertainties are anticipated other than those set out in the Reference Document. AREVA Half-year report June 30,

8 Half-year business report Summary data 2.2. Summary data Financial indicators (in millions of euro) H H /2008 change Backlog 48,876 38, % Revenue 6,522 6, % Gross margin 889 1, % In % of revenue 13.6% 20.8% -7.2 pts Earnings before interest, taxes, depreciation and amortization (EBITDA) % In % of revenue 7.0% 14.0 % -7.0 pts Operating income In % of revenue 0.2% 8.7% -8.5 pts Net fi nancial income % Net income attributable to equity holders of the parent In % of revenue 2.5% 12.3% -9.8 pts Net operating Capex (618) (455) -162 Operating cash fl ow before tax (1,115) (521) -594 Dividends paid (313) (319) +6 (in millions of euro) June 30, 2009 December 31, /2008 change Net debt at the end of the period 6,414 5, % of which SIEMENS put options 2,049 2, Defi nitions of fi nancial indicators Backlog: the backlog is valued based on economic conditions at the end of the period. It includes fi rm orders and excludes unconfi rmed options. Foreign currency orders that are hedged are valued at the hedge exchange rate. Foreign currency orders that are not hedged are valued at the exchange rate as of the last date of the period under consideration. Uranium orders are valued at the closing rate on the reference spot and long-term indexes. The backlog reported for long-term contracts recorded under the percentage of completion method and partially performed as of the reporting date is equal to the difference between (a) the projected revenue from the contract at completion and (b) the revenue already booked for this particular contract. Accordingly, the backlog takes into account escalation and price revision assumptions used by the group to determine the projected revenue at completion. Earnings before income tax, depreciation and amortization (EBITDA): EBITDA is equal to operating income plus net amortization, depreciation and operating provisions (except for provisions for impairment of working capital items). EBITDA is adjusted so as to exclude the cost of nuclear facility decommissioning obligations (dismantling, waste retrieval and packaging) met during the year, as well as the full and fi nal payments paid or to be paid to third parties for facility decommissioning. It should be noted that the cash fl ows linked to end-of-life-cycle operations are presented separately. Cash fl ows from end-of-life-cycle operations: this indicator encompasses all of the cash fl ows linked to end-of-life-cycle operations and to assets earmarked to cover those operations. It is equal to the sum of the following items: income from the portfolio of earmarked assets; cash from the sale of earmarked assets; minus acquisitions of earmarked assets; minus cash spent during the period on end-of-life-cycle operations; full and fi nal payments received for facility dismantling; minus full and fi nal payments made for facility dismantling. 6 AREVA Half-year report June 30, 2008

9 Half-year business report 2.2. Summary data 2 Free operating cash fl ow: this represents cash fl ow generated by operating activities, before income tax. It is equal to the sum of the following items: EBITDA, excluding end-of-life-cycle operations; plus losses or minus gains included in operating income on sales of property, plant and equipment (PP&E) and intangible assets; plus the decrease or minus the increase in operating working capital requirement between the beginning and the end of the period (excluding reclassifi cations, currency translation adjustments and changes in consolidation scope); minus acquisitions of PP&E and intangible assets, net of changes in accounts payable related to fi xed assets; plus sales of PP&E and intangible assets included in operating income, net of changes in receivables on the sale of fi xed assets; plus prepayments received from customers during the period on non-current assets; plus acquisitions (or disposals) of consolidated companies (excluding equity associates). Operating working capital requirements (OWCR): OWCR represents all of the current assets and liabilities related directly to operations. It includes the following items: inventories and work-in-process; trade accounts receivable and related accounts; non interest-bearing advances; other accounts receivable, accrued income and prepaid expenses; less: trade accounts payable and related accounts, trade advances and prepayments received (excluding interest-bearing advances), other operating liabilities, accrued expenses, and deferred income. NOTE: OWCR does not include non-operating receivables and payables such as income tax liabilities, amounts receivable on the sale of non-current assets, and liabilities in respect of the purchase of non-current assets. Net debt: This heading includes borrowings due in less than or more than one year, which include interest-bearing advances received from customers and put options by minority shareholders, less cash balances, non-trade current accounts, securities held for trading and other current fi nancial assets. Shares classifi ed as available-for-sale securities are now excluded from the calculation of the net debt or cash position Non-fi nancial AREVA Way performance indicators (in millions of euro) Q Q SAFETY (last 12 months) Accident frequency rate Accident severity rate DOSIMETRY Average exposure to radiation (group employees) (msv) 1.11 not available 1.22 Average exposure to radiation (subcontractors) (msv) 0.42 not available 0.50 ENVIRONMENT Fossil energy used (excluding Eurodif) (MWh) 305, ,019 1,426,204 Electric power used (excluding Eurodif) (MWh) 407, ,219 1,482,250 Direct greenhouse gas emissions (excluding transport) (MT CO2 equivalent) 172, , ,648 Indirect greenhouse gas emissions (excluding transport) (MT CO2 equivalent) 95, , ,627 AREVA Half-year report June 30,

10 Half-year business report Segment reporting 2.3. Segment reporting First half 2009 (contributions to the group) (in millions of euro) Front End Reactors and Services Back End Transmission & Distribution Corporate & other eliminations Revenue 1,556 1, , ,522 EBITDA 438 (333) (55) 459 % of revenue 28.1% -22.1% 23.5% 8.1% - 7.0% Operating income 348 (608) (61) 16 % of revenue 22.4% -40.3% 17.8% 7.1% - 0.2% Change in operating WCR (212) (97) (88) (370) (17) (783) Net operating Capex (235) (163) (50) (149) (20) (618) Free operating cash fl ow before tax (179) (595) 60 (310) (92) (1,115) Total First half 2008 (contributions to the group) (in millions of euro) Front End Reactors and Services Back End Transmission & Distribution Corporate & other eliminations Revenue 1,488 1, , ,168 EBITDA 533 (98) (31) 863 % of revenue 35.8% -6.7% 22.0 % 11.2% % Operating income 400 (258) (32) 539 % of revenue 26.8% -17.6% 18.8% 11.1% - 8.7% Change in operating WCR (264) (130) (87) (198) (59) (739) Net operating Capex (125) (178) (44) (99) (9) (455) Free operating cash fl ow before tax (46) (407) 73 (45) (96) (521) Total 2.4. Backlog The group s backlog at June 30, 2009 stood at 48,876 million euro, up 28.2% from 38,123 million euro at June The backlog for nuclear businesses was 42,908 million euro at June 30, 2009 against 32,331 million euro at June 30, In the fi rst half, AREVA has signed major multi-year contracts in the Front End division with American, European and Asian utilities. Reactors & Services have received in particular orders for the replacement of 12 steam generators in South Korea, France and the US, have signed a multi-year framework contract for providing services for EDF and have received an order for 18 primary pumps in China. In the Back End, AREVA has signed a contract with EPDC (Electric Power Development) for the supply of MOX fuel assemblies for the future nuclear power plant in Ohma, Japan. The backlog for Transmission & Distribution was 5,967 million euro at June 30, 2009 against 5,792 million euro at June 30, A total of 2,886 million euro was booked in the fi rst half, down 8.7% (down 9.7% like-for-like) by comparison to the fi rst half of 2008, with sustained activity in Asia and South America. During this half-year period, the division has won several major contracts, in particular with State Grid of China for the supply of High Voltage Direct Current transmission systems, with EWA Bahrain for the supply of 29 sub-stations and power and distribution transformers, with Kepco for the supply of 400 MW conversion sub-stations, with PT PLN for the modernisation of the Indonesian network, and with PGCIL (Power Grid Corporation of India) for the supply of 4 very high voltage stations. 8 AREVA Half-year report June 30, 2008

11 Half-year business report 2.5. Income statement Income statement (in millions of euro) H H Revenue 6,522 6,168 13,160 Gross margin 889 1,281 2,286 Research and development expenses (249) (205) (453) Marketing and sales expenses (320) (287) (607) General and administrative expenses (487) (468) (980) Other operating expenses (100) (21) (202) Other operating income Operating income Net fi nancial income (29) Income tax (58) (74) (46) Share in net income of associates (163) Net income from continuing operations Net income from discontinued operations Net income for the period Minority interests (154) 38 (91) Net income attributable to equity holders of the parent Comprehensive income (338) 434 (208) In Nuclear, the level of activity of the various business divisions and their contribution to group income can vary signifi cantly from one half-year to another. Several positive events occurred in the fi rst half of 2008, such as exceptional sales in Asia in the Front End division, favourable seasonal effects in Services and a very high concentration of production in Recycling (Back End), which led to making over 80% of 2008 nuclear operations operating income (1) in the fi rst half and around 48% of revenues. This illustrates the non-representative nature of the half-year performance by comparison to the usual profi tability profi le for nuclear operations Revenue Consolidated revenues amounted to 6,522 million euro in the fi rst half of 2009, up 5.7% on the same period in On a like-for-like basis, revenues grew by 2.8%. (in millions of euro) H H /2008 change Contribution to consolidated revenue 6,522 6, % Front End division 1,556 1, % Reactors and Services division 1,506 1, % Back End division % Nuclear 3,906 3, % Transmission & Distribution division 2,614 2, % Nuclear operations posted fi rst half 2009 revenues of 3,906 million euro, stable compared to the fi rst half of This refl ects the growth in the Front End (up 4.6%) and Reactors & Services ( up 2.8%) divisions, and a drop-off in Back End (down 9.3%) related to unfavourable production scheduling during the fi rst half of the year, but which should nevertheless not have any impact on expected annual growth. During the half-year, the exchange-rate effect amounted to +112 million euro. The effect of changes in consolidation scope of +25 million euro arises from the integration of RM Consultants into AREVA TA. On a like-for-like basis, nuclear operations fell back by 2.9%. (1) 2008 annual operating income excluding the OL3 additional provision. AREVA Half-year report June 30,

12 Half-year business report Income statement Transmission & Distribution revenues amounted to 2,614 million euro, up 14.5%, illustrating the good fl ow of the backlog in Products (up 11.8% like-for-like) and Systems (up 15.1% like-for-like). The negative effect of changes in exchange rates amounted to 20 million euro. Changes in the scope of consolidation had a +61 million euro impact and arise from the integration of recently acquired companies such as Powermann and RB Watkins. On a like-for-like basis, Transmission & Distribution reported growth of 12.5% Gross margin The group's gross margin came to 889 million euro for the fi rst half of 2009 (at 13.6% of revenues) against 1,281 million euro for the fi rst half of 2008 (20.8% of revenues). (in millions of euro) H H /2008 change Gross margin 889 1, % % of revenue 13.6% 20.8% -7.2 pts - Nuclear operations % - Transmission & Distribution % These changes are explained by: The drop in gross margin in nuclear operations, amounting to 241 million euro (6.2% of revenues) against 615 million euro (15.8% of revenues) for the fi rst half of 2008, because of the additional provisions raised against the OL3 project, because of some activities being delayed to the second half and because the fi rst half of 2008 was not really comparable since it contained exceptional division sales in the Front End; The drop in gross margin in the Transmission & Distribution division which fell from 665 million euro (29.1% of revenues) in the fi rst half of 2008 to 649 million euro (24.8% of revenues) in the fi rst half of 2009, resulting notably from strong pressure noticeable on the T&D market in the fi rst half as a consequence of the crisis Research and development The group s research and development costs are recorded on the balance sheet if they meet the criteria for fi xed assets under IAS 38, and are expensed if they do not. In the income statement, research and development expenses appear below gross margin and represent non-capitalizable expenses incurred exclusively by the group; the expenses relating to programmes fi nanced wholly or partly by customers, together with projects carried out in partnership where AREVA has rights over the commercial usage of the results, are recognised in cost of sales. All research and development costs, whether capitalized or expensed during the period, constitute the total R&D expenditure. (in millions of euro) H H in millions of euro in % of revenue in millions of euro in % of revenue Income statement: Research and development expenses (249) 3.8% (205) 3.3% Other (inc. capitalized R&D) (288) 4.4% (254) 4.2% Total research and development spending (537) 8.2% (459) 7.4% Taking into account all expenses incurred on research and development, the research and development spending amounted to 537 million euro for the fi rst half of 2009, representing 8.2% of revenues for the period, up by comparison to the 459 million euro for the fi rst half of 2008 (7.4% of revenues). 10 AREVA Half-year report June 30, 2008

13 Half-year business report 2.5. Income statement 2 This growth refl ects in particular: expenses for the nuclear divisions, which carry the burden development of the mining exploration programme and the increased R&D in reactors, equipment and nuclear services; expenses in the Transmission & Distribution division aimed mainly at improving the performance of electric power systems and equipment and developing digital controls and information systems for power grid monitoring General and administrative, marketing and sales expenses Marketing and sales expenses and general and administrative expenses came to 807 million euro in the fi rst half of 2009, or 12.4% of revenues, little changed from the level of 12.2% for the fi rst half of Other operating income, other operating expenses Other operating expenses amounted to 100 million euro against 21 million euro for the fi rst half of These notably included restructuring expenses and the fi nancial impact of the agreement with USEC bringing the "trade case" to an end. Other operating income amounted to 283 million euro against 240 million euro for the fi rst half of It in particular included a dilution gain when minority shareholders acquired equity interests in the group s subsidiaries Operating income Before the additional provision of 550 million euro recognised in the fi rst half of 2009 on the OL3 contract in Finland, operating income amounted to 566 million euro, or a 8.7% operating margin, against 860 million euro on a comparable basis in the fi rst half of 2008, or a 13.9% operating margin. This change arises particularly from the effect of several positive events that occurred in the fi rst half of 2008 such as exceptional sales in Asia in the Front End division which did not recur in the fi rst half of 2009, postponement to the second half of 2009 of the outage cycles in the United States in Services and of production in Recycling (Back End) and from the impact on the Transmission & Distribution division of the strong pressure noticeable on the market in the fi rst half as a consequence of the crisis and by the start up costs of new capacity (8 facilities in India and 3 in China). After recognising an additional provision on OL3 of 550 million euro, group operating income came to 16 million euro in the fi rst half of 2009, against 539 million euro for the same period in 2008, (which included a charge of 321 million euro to the OL3 provision). AREVA staff are carrying out the 600 million euro cost-cutting plan announced at the time of presentation of the annual results. Actual fi gures to date are in line with targets Net fi nancial income (in millions of euro) H1 2009* H1 2008* Net borrowing costs (59) (55) Discount/premium 1 (21) Share related to end-of-life-cycle operations 29 1 Income from the earmarked fi nancial portfolio Income from receivables and discount reversal on earmarked end-of-life-cycle assets Discount reversal expenses on end-of-life-cycle operations (95) (127) Share not related to end-of-life-cycle operations Income from disposals of securities and change in value of securities held for trading Financial income from pensions and other employee benefi ts (45) (35) Dividends received Other income and expenses (7) (91) Net fi nancial income *The discount/premium is categorised in Other fi nancial expenses as of December 31, It was categorised as a gross borrowing expense in the fi rst half of AREVA Half-year report June 30,

14 Half-year business report Income statement Net fi nancial income was stable compared to the fi rst half of 2008, at 212 million euro. In the fi rst half 2009 it benefi ted from gains realised on disposal of available-for-sale fi nancial assets (in the fi rst half of 2008 it had benefi ted from the gain on sale of the Repower shares). Net borrowing costs remained stable despite a substantial increase in fi nancial debt Income tax The fi rst half income tax charge was 58 million euro, an effective tax rate of 25.3% against 9.85% for the fi rst half of The effective rate of tax at June 30, 2008 benefi ted in particular from lower tax rates applicable to the gain on the sale of the Repower shares Share in net income of associates (in millions of euro) H H STMicroelectronics (124) (3) (46) Eramet (39) Other Total (163) The share in net income of associates fell signifi cantly, with a loss of 163 million euro for the fi rst half of 2009 against net income of 121 million euro for the fi rst half of This change is explained by the drop of STMicroelectronics and Eramet s results. The group may record net income from STMicroelectronics and Eramet that differs from the income reported by those companies: STMicroelectronics fi nancial statements are prepared according to U.S. GAAP and are in U.S. dollars. The group converts them into euro and adjusts them for IFRS. STMicroelectronics does not publish half-year income statements under IFRS; With regard to Eramet, income is calculated based on preliminary results. Any differences between Eramet s preliminary and fi nal fi nancial statements are recorded in the fi nancial statements for the following period. It should be noted that AREVA sold its 29.95% interest in REpower in June 2008 (see comments on net fi nancial income, note 2.5.7) Minority interests The share of net income allocated to minority interests fell from +38 million euro for the fi rst half of 2008 to a loss of 154 million euro for the fi rst half of Minority interests are as follows: (in millions of euro) H H % SIEMENS in AREVA NP (166) (44) (186) 40% minority holding in Eurodif Other (2) Total (154) 38 (91) 12 AREVA Half-year report June 30, 2008

15 Half-year business report 2.7. Review by division Net income and comprehensive income In light of the foregoing, net income attributable to equity holders of the parent for the fi rst half of 2009 was 161 million euro, against 760 million euro for the fi rst half of Net earnings per share amounted to 4.55 euro for the fi rst half of 2009 against euro for the fi rst half of Comprehensive income attributable to equity holders of the parent was a loss of 338 million euro in the fi rst half of 2009 against income of 434 million euro for the fi rst half of Aside from the drop in net income, this evolution is explained by the change in the value of available-for-sale fi nancial assets, net of tax, which totals a reduction of 433 million euro for the fi rst half of 2009, against a reduction of 278 million euro in the fi rst half of Review by division Front End division (contribution to the group, in millions of euro) H H /2008 change Backlog 27,055 19, % Revenue 1,556 1, % Operating income % In % of revenue 22.4% 26.8 % -4.4 pts Operating cash fl ow before tax (179) (46) -133 First half 2009 performance The Front End division backlog came to 27,055 million euro at the end of June Amongst the contracts won by the Front End in the fi rst half of 2009, we should particularly note the signature of multi-year contracts with US, European and Asian utilities in Mining and Enrichment. The Front End division revenues amounted to 1,556 million euro in the fi rst half of 2009, up 4.6% (up 0.6% like-for-like). The positive effect of changes in exchange rates was 60 million euro. More specifi cally: Revenues benefi ted from the increase in average selling prices of uranium in Mining, thanks to the renewal of its long-term contracts portfolio; Revenues from the Fuel and Enrichment businesses were globally stable by comparison with the fi rst half of 2008; however, the geographical mix was less favourable than in the fi rst half of 2008, which saw exceptional export sales. Operating income from the Front End division came to 348 million euro (22.4% of revenues) against 400 million euro in 2008 (26.8% of revenues). This change is explained particularly by the fi nancial impact of the agreement with USEC ending the "trade case", by the increase in costs caused by building inventories for the transition between GBI and GBII in Enrichment and the increase in structural costs generated by major projects (Eagle Rock, mining projects, etc.). Furthermore, the positive contribution from minority shareholders taking a stake in the GBII project is identical to that for the fi rst half of 2008, and the optimisation plans implemented in Mining brought production costs under control. Free operating cash fl ow before taxation generated by the Front End division was an outfl ow of 179 million euro for the fi rst half of 2009 against an outfl ow of 46 million euro for the fi rst half of This change is explained by increasing capital expenditure in Mining and Enrichment and building SWU inventories for the transition period between GBI and GBII. AREVA Half-year report June 30,

16 Half-year business report Review by division Reactors and Services division (contribution to the group, in millions of euro) H H /2008 change Backlog 8,527 7, % Revenue 1,506 1, % Operating income (608) (258) In % of revenue % % pts Operating cash fl ow before tax (595) (407) The OL3 project As announced on 25 February this year, the civil engineering work on the OL3 project is nearing completion, particularly with the installation of the dome of the reactor in the very near future. The project will then enter its fi nal phases: piping, testing and commissioning. However the work is progressing signifi cantly slower than planned due to the inadequate resources deployed by TVO to fulfi l their contractual commitments and in particular respecting the deadlines for processing the documents that have been delivered (2 months, versus 11 months in practice). The specifi c measures for speeding up the work, agreed upon and jointly announced in June 2008, have for the most part not been implemented by TVO. Furthermore, additional modifi cations imposed unilaterally by TVO and carried out by AREVA are not backed up by the requisite contract amendments. This conduct, which is not in line with standard industry practices for the construction of turnkey power plants, is leading to delays and additional costs. As the various proposals for an amicable resolution from the AREVA-SIEMENS consortium have not been successful, AREVA has decided to ensure that TVO faces up to its responsibilities. AREVA intends to redefi ne, within the framework of the contract, its relationship with the customer allowing more effi cient management of the project for all parties. Therefore, AREVA has sent the client documents detailing the methods of execution for the fi nal phases of the project that are in accordance with standard industry practices for the construction of turnkey power plants. AREVA will only commence the fi nal phases of the construction when TVO has agreed upon the proposals that have been made or issued contract amendments that include the requested modifi cations, both in terms of costs and time lines. To take into account the additional costs already incurred over the fi rst half of 2009 and risk related to TVO s ability to adapt to the working methods necessary to continue the works, AREVA has recorded an additional provision of 550 million euro, bringing the estimated result at completion to (2,300) million euro. It is specifi ed that: The conduct of the client continues, for the ongoing work, to raise uncertainties around the fi nal cost of the project and around the date of commissioning; Claims amounting to 1,000 million euro have already been sent to TVO by the AREVA-SIEMENS consortium. Additional claims are being prepared. In accordance with the applicable accounting principles, AREVA has not accounted for these positive elements; Lastly this amount does not include TVO s claim because the AREVA-SIEMENS consortium deems that the allegations presented in this claim are without foundation and without value with respect to the contract and to Finnish law. First half 2009 performance The backlog for the Reactors & Services division came to 8,527 million euro at June 30, In terms of marketing and sales activity, the fi rst half of 2009 was notable for: Orders for the replacement of 12 steam generators in France, the USA and South Korea; The gain of two contracts for over 150 million euro for the supply of 18 primary pumps for the Chinese utility CNPEC; The award by the Syndicat Mixte des Transports pour le Rhône et l Agglomération Lyonnaise of a contract for 58 million euro for the renewal of the automatic operating systems of the Lyon subway; The signature of a multi-year framework contract with EDF for supply of services. 14 AREVA Half-year report June 30, 2008

17 Half-year business report 2.7. Review by division 2 Revenues for the Reactors and Services division amounted to 1,506 million euro, up 2.8% (down 1.9% like-for-like). The positive effect of changes in exchange rates was 44 million euro. Items of note were as follows: Reactors saw sustained recurring business; Services suffered from unfavourable seasonality linked notably to a later start than in 2008 of the outage cycles in the United States. Operating loss for the division before the OL3 provision was 58 million euro in the fi rst half of 2009 against operating income of 63 million euro for the fi rst half of This change arises from: The impact of seasonality in the Services business, particularly in the USA; The continuing Research, Development and Marketing/Sales efforts to sustain the required growth in major reactor projects; The weakness of an industrial partner which held back the Renewable Energies business in a diffi cult economic environment. After including the additional provision of 550 million euro for the OL3 project, the operating loss for the division comes to a loss of 608 million euro, against a loss of 258 million euro for the fi rst half of Free operating cash fl ow for the Reactors and Services division is negative for the fi rst half of 2009, at an outfl ow of 595 million euro, compared with an outfl ow of 407 million euro for the fi rst half of This change is explained by: An increase in the OL3 project expenses; Lack of major payment milestones for reactors during the fi rst half Back End division (contribution to the group, in millions of euro) H H /2008 change Backlog 7,327 5, % Revenue % Operating income % In % of revenue 17.8% 18.8% -1.0 pts Operating cash fl ow before tax First half 2009 performance The backlog for the Back End division came to 7,327 million euro at June 30, Amongst the most signifi cant contracts won during the fi rst half, we note: A contract for the supply of MOX fuel to the Japanese utility Electric Power; A long-term contract for supply to KKL of packaging for storing spent nuclear fuel of the Leibstadt power station in Switzerland. Revenue for the Back End division came to 843 million euro, down 9.3% (down 10.1% like-for-like). The positive effect of changes in exchange rates was 9 million euro. This change can be explained mainly by a fall of production in Recycling during the fi rst half of 2009, compared to the fi rst half of 2008 during which a larger proportion of the annual volumes were achieved. The Back End division recorded operating income of 150 million euro against 175 million euro for the fi rst half of 2008, in line with the scheduling of production in 2009, the annual level of which should be stable by comparison to Operating margin turned out at 17.8%, against 18.8% a year earlier. Free operating cash fl ow for the Back End division amounted to an infl ow of 60 million euro for the fi rst half of 2009 against 73 million euro for the fi rst half of The reason for this change is: A drop in EBITDA caused by the lower level of activity by comparison to the fi rst half of 2008; The growth in capital expenditure (development of the Creuset froid technology). AREVA Half-year report June 30,

18 Half-year business report Review by division Transmission & Distribution division (contribution to the group, in millions of euro) H H /2008 change Backlog 5,967 5, % Revenue 2,614 2, % Operating income % In % of revenue 7.1% 11.1% pts Operating cash fl ow before tax (310) (45) First half 2009 performance The backlog for the Transmission & Distribution division came to 5,967 million euro at June 30, The group notably won: A contract for a total value of over 100 million euro with the State Grid of China, which was won in partnership with the China Electric Power Research Institute, for the supply of HVDC transmission systems for interconnection projects linking the Ningdong area in Sangdong (north-east of the country) to the Three Gorges Dam in Shanghai; A contract for over 80 million euro with the South Korean utility KEPCO for the supply of 400MW conversion substations for the HVDC link between the South Korean island of Jeju and the mainland; Orders to the value of approximately 50 million euro for the supply of four ultra high voltage units for the main power transmission company in India, Power Grid of India Ltd; A contract (through the consortium formed by AREVA's Transmission & Distribution division and PT Multifabrindo Gemilang, an Indonesian electrical equipment contractor) for a total value of 120 million euro with the Indonesian national utility PT PLN; Two contracts with the Bahrain Electricity & Water Authority (EWA) for the supply of 220kV transformers and 29 66kV-substations. Revenue for the Transmission & Distribution division came to 2,614 million euro in the fi rst half of 2009, up 14.5% (up 12.5% like-for-like). For the half-year, the positive 61 million euro effect of changes in consolidation scope more than offset the negative 20 million euro impact from changes in exchange rates. The growth in revenues was fuelled mainly by the Near and Middle-East and by North America. This refl ects the good performance of the Products BU (up 11.8% like-for-like) and the Systems BU (up 15.1% like-for-like) due to the successful implementation of projects. Furthermore, the division has not had any orders cancelled since the end of March Operating income for the Transmission & Distribution division reached 186 million euro in the fi rst half of 2009 with a margin of 7.1%, against 253 million euro a year earlier, with a margin of 11.1%. This change is mainly explained by the impact of the strong pressure noticeable on the T&D market in the fi rst half as a consequence of the crisis and by the start up costs of new capacity (8 facilities in India and 3 in China). Operating cash fl ow was negative at 310 million euro at the end of June 2009, compared with a negative of 45 million euro at the end of June This change is explained by: Longer time to receive payments; Unfavourable phasing of payment schedules in the fi rst half of 2009, by comparison to the same period in the previous year; Investments in capacity and acquisitions in Services in the United States and in the United Kingdom Corporate and other operations (contribution to the group, in millions of euro) H H /2008 change Revenue Operating income (61) (32) - 29 Operating cash fl ow before tax (92) (96) + 4 The operating loss for Corporate increased from 32 million euro to 61 million euro between the fi rst half of 2008 and the fi rst half of It in particular includes the increase in marketing and sales expenses as a result of expanding the business into new countries. 16 AREVA Half-year report June 30, 2008

19 Half-year business report 2.8. Cash fl ow Cash flow Change in net debt (in millions of euro) H H EBITDA In % of revenue 7.0% 14.0% Gains/losses from disposal of operating assets and other non-cash items (173) (190) Change in operating WCR (783) (739) Net operating Capex (618) (455) Free operating cash fl ow before tax (1,115) (521) Cash fl ows for end-of-life-cycle operations (33) (20) Dividends paid (313) (319) Other (net fi nancial assets, net taxes, non-operating WCR) Change in net debt (915) (432) June 30, 2009 December 31, 2008 Net debt at the end of the period (including put options of minority interests) (6,414) (5,499) Free operating cash fl ows by business (in millions of euro) EBITDA Change in operating WCR Operating Capex net of disposals Free operating cash fl ow before tax H H H H H H H H Front End (212) (264) (235) (125) (179) (46) Reactors & Services (333) (98) (97) (130) (163) (178) (595) (407) Back End (88) (87) (50) (44) Transmission & Distribution (370) (198) (149) (99) (310) (45) Corporate (55) (31) (17) (59) (20) (9) (92) (96) Group total (783) (739) (618) (455) (1,115) (521) Group EBITDA came to 459 million euro in the fi rst half of 2009 against 863 million euro in the fi rst half of This change is notably due to unfavourable seasonality. The change in operating working capital requirement in cash use of 783 million euro in the fi rst half of 2009, against a cash use of 739 million euro in the fi rst half of This arises mainly from building up SWU inventories for the transition between GBI and GBII in the Front End together with the longer time required to receive payments and the unfavourable phasing of payment schedules in the Transmission & Distribution division. Net operating Capex increased by 162 million euro over the period, coming to 618 million euro, against 455 million euro for the fi rst half of This increase was the result of a rise in gross operating capex of 221 million euro, relating particularly to expanding production facilities in the Mining, Enrichment and Equipment business units. Including these items, the group s free operating cash fl ow in the fi rst half amounted to an outfl ow of 1,115 million euro, against an outfl ow of 521 million euro in the fi rst half of Comments regarding changes in free operating cash fl ows by division are given in section 2.7. AREVA Half-year report June 30,

20 Half-year business report Balance sheet items Cash fl ows for end-of-life-cycle operations To meet its dismantling commitments, the group constituted a dedicated portfolio to fund expenses relating to these operations. It is the group s policy to offset negative cash fl ows associated with end-of-life-cycle operations with positive cash fl ows from dividends or sales of securities held in the portfolio. In the fi rst half of 2009, cash fl ows related to end-of-life-cycle operations came to an outfl ow of 33 million euro, against an outfl ow of 20 million euro at June 30, The main transactions were as follows: Disbursements relating to end-of-life-cycle operations totalling -93 million euro, up on the fi rst half of 2008 (-51 million euro); Dividends received in the amount of 40 million euro, compared with 25 million euro at June 30, Other cash fl ows Other cash infl ows came to 546 million euro and include in particular the sale of available-for-sale fi nancial assets Balance sheet items Working capital assets and liabilities, as well as deferred taxes, are offset in the simplifi ed balance sheet. Assets and liabilities are not offset in the detailed balance sheet presented in section 4.3. (in millions of euro) June 30, 2009 December 31, 2008 Net goodwill 5,016 4,803 Property, plant and equipment (PP&E) and intangible assets 8,611 8,002 Assets earmarked for end-of-life-cycle operations 5,263 5,224 Equity associates 1,571 1,757 Other non-current fi nancial assets 1,174 2,152 Operating working capital requirement 1, Total assets of the simplifi ed balance sheet 23,098 22,594 Equity and minority interests 6,693 7,292 Provisions for end-of-life-cycle operations 5,696 5,674 Other provisions 3,655 3,472 Other assets and liabilities Net borrowings 6,414 5,499 Total liabilities and equity of the simplifi ed balance sheet 23,098 22, Fixed assets, excluding assets earmarked to fi nance end-of-life-cycle operations Goodwill on consolidated companies was up 213 million euro, mainly because of the fi rst time consolidation of Powermann and RB Watkins in 2009 and the adjustment arising from the put option held by the minority shareholder in AREVA NP which depends on the results achieved during the period. The drop by 186 million euro in the "Equity associates" line is mainly due to the poor results of Eramet and STM in the fi rst half of The 978 million euro drop in Other non-current fi nancial assets is attributable mainly to the drop in the value of publicly traded shares held by the group and by the sale of available-for-sale fi nancial assets. 18 AREVA Half-year report June 30, 2008

21 Half-year business report 2.9. Balance sheet items Assets and provisions for end-of-life-cycle operations The change in the balance sheet from December 31, 2008 to June 30, 2009 with regard to assets and provisions for end-of-life cycle operations is summarized in the table below. (in millions of euro) June 30, 2009 December 31, 2008 ASSETS End-of-life-cycle asset AREVA share (to be amortized in future years) Third party share Earmarked fi nancial assets 4,986 4,954 Liabilities Provisions for end-of-life-cycle operations 5,696 5,674 - Provisions to be funded by AREVA 5,419 5,404 - Provisions to be funded by third parties Provisions against end-of-life-cycle operations at June 30, 2009 came to 5,696 million euro, against 5,674 million euro at December 31, Earmarked assets relating to these obligations came to 5,263 million euro, including third party receivables of 277 million euro and the fi nancial portfolio that AREVA has earmarked to these obligations totalling 4,986 million euro (including receivables). The nature of the commitments and the calculation of the provision are presented in Note 7 to the consolidated fi nancial statements Operating working capital requirement The group operating working capital requirement amounted to 1,463 million euro at June 30, 2009, against 656 million euro at December 31, In Nuclear, operating working capital requirement amounted to 408 million euro particularly as a result of building SWU inventories for the transition between GBI and GBII, while in the Transmission & Distribution division it reached 1,059 million euro (corresponding to 70 days sales, against 46 at the end of June 2008) because of the longer time required to receive payments and unfavourable phasing of payment schedules during the fi rst half of Initiatives for reducing working capital requirement by 300 million euro are ongoing, with particular emphasis on reducing inventories in the Front End and Transmission & Distribution divisions, and also on optimising project cash fl ow Net debt at the end of the period The group s net debt rose to 6,414 million euro at the end of June 2009 from 5,499 million euro at the end of This increase arises mainly from the changes in free cash fl ow set out above and from paying dividends totalling 313 million euro, partly offset by the proceeds of sale of available-for-sale assets Equity The payment of dividends and the reduction in equity, which fell from 7,292 million euro at December 31, 2008 to 6,693 million euro at June 30, 2009, are essentially due to changes in unrealised gains/losses on fi nancial instruments. Changes in equity are presented in detail in the consolidated fi nancial statements. AREVA Half-year report June 30,