February 14, 2012 / 9:44 PM / in 6 years

Areva probe critical of UraMin buy, no proof of scam

PARIS (Reuters) - An internal inquiry at Areva AREVA.PA has not found any evidence of fraud linked to the French nuclear group’s takeover of Canadian mining company UraMin but criticized the way it was bought and urged changes to Areva’s corporate governance.

State-controlled Areva bought UraMin’s three Southern African mines for $2.5 billion in 2007, when buoyant demand for nuclear energy combined with production delays at other mines, a frenzy to secure supplies and acquisitions in the sector pushed uranium prices to $135 a pound.

But the UraMin mines have yet to prove their money’s worth at today’s price of $52 a pound, prompting Areva in December to write down nearly their entire value and to appoint three of its supervisory board members to conduct a review.

The supervisory board pointed to a “certain malfunctioning in Areva’s governance” and concluded that the context of 2007 led the company, at the time led by Chief Executive Anne Lauvergeon, “to underestimate the risk” of the acquisition.

Among its criticisms, the supervisory board said that the managing board had failed to clearly point to the operational risks in getting the mines to produce during presentations to the Government Shareholding Agency (APE), which acts as a shareholder for the state and clears investments and takeovers, or to the supervisory board.

Areva’s write-down prompted speculation that the deal had been a scam and the story turned into a complex saga with the emergence of a report commissioned by Areva’s security service on whether Lauvergeon’s husband had “illegally benefited” from the takeover. No proof has been found.

“If certain rumors have led to believe that Areva has been a victim of a fraudulent moves, the committee has no knowledge of any elements supporting these hypotheses,” the supervisory board wrote in a statement on Tuesday.

Under Lauvergeon, dubbed “Atomic Anne” for her feisty personality, Areva developed into a one-stop shop for nuclear energy. But the government ousted her in June after 10 years at the helm following a string of setbacks, including project delays, cost overruns and a public spat with utility EDF (EDF.PA).

The supervisory board did not question the company’s previous financial accounts, but urged changes to its governance to ensure that any decisions related to acquisitions or key investments would be made under the best circumstances.

As a result, the supervisory board proposed Areva to seek its advice on deals exceeding 20 million euros ($26.26 million).

An Areva spokesman said the company would adopt the board’s recommendations, hoping it would be able to “turn the page” and get on with its day-to-day business.

The UraMin deal is also at the centre of a dispute between Lauvergeon and Areva about her 1.5 million euro severance bonus. Judges will rule on February 22 whether Areva was right to suspend the bonus, pending the outcome of the supervisory board’s probe.

“Areva has recognized the futility of its attacks over the past months,” Lauvergeon wrote Tuesday in a statement sent by her lawyer. She pointed, among others things, to the correct financial accounts the supervisory board report referred to, as well as its description of the context of the acquisition.

The UraMin acquisition and allegations that Lauvergeon’s spouse was spied on to see if he had benefited from the transaction have bogged down Areva as it struggles to recover from last year’s Japanese nuclear disaster.

Areva’s new CEO Luc Oursel in December laid out a new five-year plan to overhaul of the company following Japan’s Fukushima disaster that has led some governments to turn their backs on nuclear energy.

ANNUAL AUDIT

Getting the UraMin mines -- Trekkopje in Namibia, Bakouma in the Central African Republic and Ryst Kuil in South Africa -- to produce has proven much harder than expected and a drop in uranium prices led Areva to put off the start of production.

Uranium prices have fallen to $52 per pound from about $74 before the Fukushima nuclear disaster hit Japan in March. The earlier credit crisis had pushed prices to $40 a pound in March 2009. Areva is among the world’s top uranium producers.

The supervisory board recommended the company appoint a committee to audit the estimates of the three mines’ resources and reserves every year.

The extent and timing of the UraMin write-down, four years after the purchase, have called into question a deal Areva’s board and the state unanimously cleared.

The industry ministry and parliament are each investigating the UraMin acquisition and earlier this month Lauvergeon asked a French court to appoint an expert to examine the circumstances of the takeover. The Paris civil court will give its decision on Lauvergeon’s request on February 29.

Reporting by Caroline Jacobs, Editing by Elena Berton and Tim Dobbyn

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