EN Official Journal of the European Union L 155/23

COMMISSION DECISION (EU) 2017/1021

of 10 January 2017

on State aid SA.44727 2016/C (ex 2016/N) which France is planning to implement in favour of the Areva group

(notified under document C(2016) 9029)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Treaty establishing the European Atomic Energy Community,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to those articles (1), and having regard to their comments,

Whereas:

1. PROCEDURE

(1) On 29 April 2016, after pre-notification contacts, the French authorities notified to the Commission restructuring aid in favour of the Areva group (‘the Areva Group’) in the form of two capital injections by the French State. The French authorities sent additional information to the Commission by letters dated 27 May and 6 July 2016.

(2) By letter dated 19 July 2016, the Commission informed the French authorities that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of the aid. The French authorities sent their comments on that decision to the Commission by letter dated 12 September 2016.

(3) The Commission decision to initiate the procedure (‘the opening decision’) was published in the Official Journal of the European Union (2) on 19 August 2016. The Commission called on interested parties to submit their comments.

(4) The Commission received comments within the deadline from the following interested parties: Urenco, Teollisuuden Voima Oyj (‘TVO’), Siemens, the Areva Group, and a third party who wished to remain anonymous. It forwarded them to France, giving it the opportunity to comment on them, and received its comments by letter of 18 October 2016.

(5) The French authorities sent a number of additional comments on 30 November and again on 7, 12, 21 and 22 December 2016.

(6) In parallel to the proceedings in respect of the restructuring aid, on 27 July 2016 the French authorities notified to the Commission rescue aid of EUR 3.3 billion in the form of two loans to the Areva Group, one of EUR 2 billion granted to the parent company Areva SA (‘Areva SA’), and the other of EUR 1.3 billion to its wholly owned subsidiary New Areva (‘New Areva’) (3). These loans are to be converted into capital in these two entities when the capital injections at issue in this Decision are made. The notified rescue aid, registered under number SA.46077, is the subject of a separate decision.

2. DETAILED DESCRIPTION OF THE AID

2.1. Beneficiary and background to the granting of the aid

2.1.1. Overview of the Areva Group

(7) The Areva Group is listed on the stock exchange. The French State directly or indirectly controls 86,52 % of it. The State directly owns 28,83 % of the parent company, Areva SA, and indirectly owns 54,37 % and 3,32 %, via the Atomic Energy Commission (Commissariat à l'Énergie Atomique, ‘CEA’) and Bpifrance Participations respectively. Areva SA controls the various Areva Group subsidiaries in the proportions shown in Figure 2 below.

(8) The Areva Group is active in the whole range of nuclear-cycle activities, through four business lines: (a) mining (exploration, development, extraction and site reclamation), accounting for 18 % of its turnover in 2015; (b) front-end operations (conversion and enrichment of uranium, fuel design and production), accounting for 28 % of its turnover in 2015; (c) back-end operations (nuclear waste reprocessing and recycling as MOX fuel (4), nuclear logistics, decommissioning and services), accounting for 19 % of its turnover in 2015; (d) reactors and associated services (design, construction and maintenance of nuclear reactors, including naval propulsion reactors, and ancillary activities such as nuclear measurements), accounting for 34 % of its turnover in 2015.

(9) The group's operations also include renewable energies, though this activity is on a smaller scale and is currently being rationalised. It accounted for less than 1 % of the Areva Group's turnover in 2015.

(10) These four business lines can be grouped into two main historically distinct and complementary activities: (i) nuclear fuel cycle management, comprising mining, and front-end and back-end operations, and (ii) reactors. The first was carried on by Cogema and the second by Framatome, before these two entities merged in 2001 to form the Areva Group. Figure 1 Overview of the Areva Group's activities

(11) The distinction between the two main business categories was carried over into the organisation chart for the merged Areva Group, as shown in Figure 2. The reactors business was housed in the subsidiary Areva Nuclear Power (‘Areva NP’) (and, where naval propulsion was concerned, in Société Technique pour l'Énergie Atomique (‘Areva TA’)), while the fuel cycle business was divided between Areva Nuclear Cycle (‘Areva NC’) for the front end and back end of the cycle, and the subsidiary ‘Areva Mines’ for mining activities. Nuclear fuel assembly, despite being linked to the fuel cycle, was housed in Areva NP because of the close synergies between assembly and reactor design (5). Figure 2 Simplified organisation chart for the Areva Group as at 31 December 2014

(12) As at 31 December 2015 the Areva Group employed 39 537 people. In 2015 its total turnover came to EUR 8,2 billion, compared with EUR 8,3 billion in 2014. However, applying IFRS Standard 5 on Non-current Assets Held for Sale and Discontinued Operations (6) resulted in a published turnover for the Areva Group of EUR 4,2 billion.

2.1.2. The difficulties encountered by the Areva Group

(13) The difficulties encountered by the Areva Group arise first from the consequences of the sharp downturn in the nuclear market and from the adverse economic and financial conditions since 2008. Second, the Areva Group made significant losses on a small number of industrial projects. Lastly, its profitability fell as a result of certain acquisitions and the development of certain activities.

(14) Regarding the first difficulty, the accident at Fukushima in 2011 contributed to a rapid downturn in nuclear markets. Since that date, a number of reactors have been shut down and countries such as Germany and Switzerland have decided to pull out of nuclear energy. Plans for new power stations in countries such as China have also been put on hold. Both the fuel and the reactor markets have been affected, and the Areva Group's results have suffered as a consequence.

(15) With sources of long-term financing drying up as a result of the financial crisis in 2008 and the entry into force of new prudential rules, it has become more difficult to finance capital-intensive projects such as nuclear power stations.

(16) Moreover, the contraction of the market and the resulting overcapacity hit at a time when the Areva Group had decided to invest in modernisation and was facing an increase in its operating costs. This had a direct impact on its cash flows and forced it to resort to debt to finance its short-term operations. At the same time, in view of the deteriorating market outlook, the Areva Group had to write down assets.

(17) Regarding the second difficulty, the Areva Group accumulated major losses on a number of industrial projects, the most important of which is the construction of a new-generation nuclear plant at Olkiluoto in Finland (‘OL3 project’) for TVO.

(18) The project is being led by a consortium (‘the Consortium’) formed in 2003 by the Areva Group, through Areva NP and its subsidiary Areva GmbH (‘Areva GmbH’), and Siemens. The project is some nine years behind schedule and has overrun its costs, resulting in a loss on completion for the Areva Group estimated at EUR 5,5 billion (7). The Areva Group has issued a liability guarantee, via its parent company Areva SA, in favour of its customer TVO, although according to the French authorities questions remain regarding its validity and scope.

(19) The OL3 project is the subject of a major arbitration case between the Consortium and TVO, with each party claiming that the other is responsible for the significant delays and cost overruns at the site. The parties are seeking several billion euros in compensation from each other. […] (*1).

(20) The Consortium and TVO had started negotiating an overall settlement, contractually setting a new provisional date for delivery (8) […], in order to resolve the arbitration dispute […] (9).[…].

(21) The French authorities also gave details of the losses associated with the JHR projects (Jules Horowitz Reactor — a planned materials testing reactor under construction at CEA's Cadarache site) and […] (upgrade of the […] reactor at the […] plant), which have generated losses of several hundred million euros to date.

(22) Lastly, regarding the third difficulty, the financial health of the Areva Group also deteriorated as a result of unprofitable acquisitions and development projects, in particular in mining (the acquisition of Uramin, for example, gave rise to losses of close on EUR […]) and in renewable energy.

(23) For all these reasons, the Areva Group has recorded substantial accumulated losses in excess of EUR 9 billion over the financial years 2011 to 2015. The Areva Group financed these losses and the investments needed to modernise its industrial plant (10) with debt, via both banks (‘banking debt’) and the capital markets (‘bond debt’). After it drew down new banking lines in early 2016, its debt on 5 January 2016 stood at EUR 9,4 billion (11), EUR 6 billion of which was bond debt.

(24) In view of the outlook for the Areva Group, its capital structure does not allow it to cover its debts, which is why the French authorities have launched a wide-ranging restructuring exercise in cooperation with the Areva Group.

2.2. Areva Group's restructuring plan

(25) In their notification of 29 April 2016 the French authorities outlined a restructuring plan covering the period from November 2014 to December 2019 (‘the restructuring period’) with a view to restoring the Areva Group's competitiveness and improving its financial structure. Under the plan, the Areva Group will refocus its activities on the nuclear fuel cycle. The restructuring plan will be accompanied by industrial restructuring under a Performance and Competitiveness Plan designed to generate cost savings of some EUR 500 million by 2018 within the continuing business operations, and major financial restructuring, primarily recapitalisation of the Areva Group.

2.2.1. Refocusing on the fuel cycle business

(26) Refocusing on the fuel cycle business will be achieved by (i) divesting the Areva Group's other activities, (ii) creating the new legal entity New Areva to carry on the fuel cycle operations, and (iii) ring-fencing certain liabilities in the current parent company Areva SA.

2.2.1.1. Divestments made or planned by the Areva Group

(27) The divestments concern the following subsidiaries and operations: (a) The operations managed today by Areva NP, a wholly owned subsidiary of Areva SA. (b) Areva TA, which is 83,58 % owned, directly or indirectly, by Areva SA. In view of the sensitive nature of Areva TA's nuclear propulsion business, the Areva Group's stakes in the company are being sold to a consortium of public shareholders (French State, CEA and French defence firm DCNS). The divestment agreement was signed by the parties to the transaction on 15 December 2016. Areva TA is being divested without its subsidiary Elta, which is being sold off separately. (c) Canberra, which is wholly owned by the Areva Group: this divestment took place on 1 July 2016. (d) Smaller-scale divestments, such as the subsidiary Elta (66 % of which is held by Areva TA and 34 % by Areva SA), which specialises in electronic systems for the aerospace industry, […].

(28) The Areva Group also plans to withdraw in the short and medium term from practically all its activities in renewable energy and energy storage. Adwen, a company specialising in offshore wind energy, is in the process of being sold to the Spanish group Gamesa. In floating offshore wind, […]. In biomass, […]. In 2014 the Areva Group decided to gradually wind down its concentrated solar power activities, once current projects have been completed. Lastly, the Areva Group retains a minority stake in an undertaking that is developing electrolysis technologies for energy storage and a small research and development operation in flow batteries and hydrogen fuel cells.

(29) The divestment of the activities carried on to date by Areva NP is subject to specific arrangements and a number of conditions set out in the share purchase agreement (‘the SPA’) signed by EDF and the Areva Group on 15 November 2016.

(30) First, the parties have agreed that EDF should be insulated from a certain number of risks linked today to Areva NP. These risks are associated primarily with the continuation of the OL3 project, but also with the anomalies detected during quality audits of equipment manufactured by Areva NP at the Le Creusot, Jeumont and Saint-Marcel plants (‘the components contracts’). To insulate EDF, the parties chose a hive-down mechanism whereby Areva NP's principal activities will be transferred to a new entity (‘New Areva NP’) for sale to EDF. The activities related to performance of the OL3 contract […] (12) will remain with the old Areva NP, and through it the parent company Areva SA.

(31) Lastly, the sale will take place only once certain conditions have been met. These include the condition that […] Flamanville 3 project does not throw up any anomalies that would significantly push up the costs or delay the project. […] vessel is […] subject to a specific testing programme following the discovery in 2014 of non-compliant values in analyses conducted on a part similar to that at Flamanville 3, resulting in a higher than expected carbon concentration (‘carbon segregation’). The Areva Group and EDF proposed further tests (‘demonstration programme’) to provide additional guarantees to demonstrate the reliability and safety of the vessel despite the carbon segregation issue. These adaptations to the testing programme were approved by the French Nuclear Safety Authority (Autorité de Sûreté Nucléaire, ‘ASN’) (13). The tests comprising the demonstration programme ran until the end of 2016. On 16 December 2016 the Areva Group and EDF submitted the final report on the tests to ASN, which expects to take five months to analyse the results and publish its final conclusions.

(32) The initial restructuring plan saw New Areva keep a strategic 15 % stake in New Areva NP. However, in response to the doubts raised by the Commission during its in-depth investigation, the French authorities have committed to a full divestment by the Areva Group of its reactors business, which means that Areva SA and New Areva will have no capital links with New Areva NP following implementation of the restructuring plan notified to the Commission.

2.2.1.2. Hive-down of the nuclear fuel cycle business

(33) The Areva Group set up the company New Areva, which today is wholly owned by Areva SA, to take over: (a) all the Areva Group's fuel cycle assets in mining, chemicals, enrichment, decommissioning, recycling and fuel cycle engineering, including the stakes in Areva NC and Areva Mines, but excluding the assets held for sale; (b) the bonds and intra-group debt.

(34) On 30 August 2016 the agreement on partial transfer of assets from Areva SA to New Areva was signed and on 27 September 2016 the agreement of all the holders of bonds transferred to New Areva was obtained. The creation of New Areva was approved by the extraordinary general meeting of Areva SA shareholders on 3 November 2016.

(35) The capital of the new entity is to be increased in the amount of EUR 3 billion by the French State and a number of third-party investors. The French State will inject EUR 2,5 billion, and the third-party investors, EUR 500 million. With the shares in New Areva valued, before the transaction, at EUR 2 billion, after the transaction its capital will be held in the following proportions: 40 % by Areva SA, 50 % directly by the French State, and 10 % by third-party investors.

2.2.1.3. Ring-fencing of certain liabilities of the Areva Group

(36) As part of the restructuring, the risks associated with the OL3 project and […] will be borne by the current parent company, Areva SA, either directly or via Areva NP. Areva SA will also retain the Areva Group's banking debt, but will lose its principal business activities with the divestment of New Areva NP and the hive-down of the fuel cycle operations.

2.2.2. Performance and Competitiveness Plan

(37) In order to improve its competitiveness and operational performance after refocusing on the fuel cycle, the Areva Group has started to implement a Performance and Competitiveness Plan.

(38) The aim is to make cost savings of EUR 500 million per year, thanks to substantial efforts.

(39) The Performance and Competitiveness Plan has four strands: (i) selectivity in purchasing, (ii) better use of sales forces, (iii) improved productivity (in particular through a voluntary redundancy plan) and (iv) wage moderation. The first measures were taken in 2015 and the Plan is expected to run until 2018.

2.2.3. Financial restructuring

(40) The barely sustainable financial structure of the Areva Group calls for restructuring.

(41) The proceeds from the divestment of the various subsidiaries listed in recitals 27 and 28 will constitute a first source of financing for the liquidity requirements of the Areva Group.

(42) The Areva Group is also mobilising own financing of around EUR [0-2 billion], split between a structural reduction of EUR [0-1 billion] in the minimum cash balance and various transfers of claims worth EUR [0-1 billion]. These transactions are described in more detail in recital 321.

(43) However, these resources are not sufficient to tackle the Areva Group's debt position. The French authorities estimate the Areva Group's capital shortfall at EUR 5 billion. The restructuring plan therefore includes a capital contribution of EUR 5 billion, broken down as follows: (a) EUR 3 billion for New Areva, subscribed as set out in recital 35. This amount was calculated on the basis of two objectives: first, securing New Areva's liquidity needs up to 2019 inclusive and, second, enabling New Areva, by the end of the restructuring period, to reach debt ratios compatible with an investment grade risk profile so that it can refinance itself on the markets […] (14). (b) EUR 2 billion for Areva SA, subscribed entirely by the French State, to cover the costs of the operations that will continue to be housed in Areva SA (primarily the OL3 project costs, […], and the repayment of the Areva Group's banking debt (15)).

2.3. Notified aid

(44) On 29 April 2016 the French authorities notified as a single restructuring aid measure the planned subscription by the French State to two capital injections in Areva SA and New Areva respectively for a total amount of EUR 4,5 billion. This aid is to be financed from the French State's own funds.

(45) The compatibility of restructuring aid has to be assessed under the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (16) (‘the Guidelines’). Following a preliminary investigation, the Commission expressed doubts about the compatibility of the aid with the Guidelines.

2.4. Grounds for initiating the procedure

2.4.1. Doubts about the plan for returning the restructured Areva Group to long-term viability

(46) The Commission questioned whether the assumptions underpinning the plan for returning the Areva Group to long-term viability were realistic.

(47) It found that the baseline scenario for New Areva did not clearly identify what impact, including in terms of lost synergies, the various divestments under the restructuring plan (especially of New Areva NP) might have on the nuclear fuel cycle operations. There was a contradiction here with the assertion by the French authorities that the divestments reduced the competitiveness of the restructured Areva Group and thus constituted genuine compensatory measures.

(48) The Commission also found that the adverse scenario had not been based on a proper sensitivity analysis clearly identifying and ranking the main risk factors for the Areva Group.

(49) In addition, the Commission had doubts about whether New Areva could return to long-term viability in an adverse scenario, as this scenario threw up a financing gap […].

(50) In respect of Areva SA, the forecasts notified by the French authorities still involved too many uncertainties, including around the quantification of the hive-down scenario.

2.4.2. Doubts about the proportionality of the aid

(51) In the light of the information notified by the French authorities, the Commission concluded that the principle of adequate burden-sharing appeared to have been complied with, though it required clarifications on the treatment of the existing minority shareholders.

(52) However, the Commission had doubts about the Areva Group's own contribution to the costs of its restructuring. The forecasts provided by the French authorities implied that the Areva Group would in principle be able to finance more than 50 % of its restructuring costs. However, the total of the own contributions came to EUR [9-11 billion], which was higher than the financing shortfall estimated at EUR [8-9 billion], and no justification for the difference was provided. Moreover, several of the elements of the own contribution, such as the planned divestments or the contribution from third-party investors to New Areva's capital injection, were still too uncertain to be classified as ‘real and actual’.

2.4.3. Doubts about the measures to limit distortions of competition

(53) The Commission recognised that the various total or partial divestments undertaken by the Areva Group resulted in a significant reduction in the scope of its business — some 50 % based on consolidated turnover or on the number of staff. However, the impact of these divestments on the competitive situation was not obvious.

(54) In the Commission's view, not all the divestments could be placed on the same footing. The sale of relatively small subsidiaries such as Areva TA or Canberra was not in proportion to the scale of the planned aid.

(55) There remained the partial divestment of New Areva NP, which did seem in line with the amount of the aid, but did not appear to have a direct impact on the markets in which the Areva Group would have a significant position after the restructuring. The Commission had questions therefore about the two assumptions underpinning the assertion by the French authorities that this was a pro-competitive measure: first, that there were strong synergies between the reactors business and the fuel cycle business, such that there was an advantage to operating as an integrated group in nuclear markets; and second, that the Areva Group would lose the benefit of these synergies by divesting its subsidiary New Areva NP.

(56) Regarding the second assumption in particular, the Commission noted that, by virtue of a Memorandum of Understanding signed by EDF and the Areva Group on 20 July 2015, the two groups appeared to be rebuilding contractually the synergies that had previously existed structurally.

(57) For these different reasons, the Commission had doubts about the effects that the divestment of New Areva NP would have on the Areva Group's competitive position in its markets after the restructuring, and thus about whether this compensatory measure was sufficient.

(58) Lastly, the Commission was surprised that the French authorities refused to give an undertaking as required in the Guidelines that the restructuring aid would not be used to acquire shares. The Commission therefore invited the French authorities to include any such transactions in the restructuring plan, if they were found to be indispensable to the return to long-term viability of the Areva Group.

3. COMMENTS BY THIRD PARTIES

3.1. The Areva Group

(59) The Areva Group gave its full support to the comments submitted by the French authorities on 12 September 2016, which it had helped to formulate.

(60) With respect to the doubts expressed by the Commission, the Areva Group stressed the following key points: (a) The Areva Group was confident that the restructured Group would return to long-term viability, thanks to its modernised industrial plant and the expected growth in energy demand. (b) The divestment of New Areva NP to EDF constituted a sufficient compensatory measure. It would have a significant negative impact on the restructured Areva Group's competitive position: besides a 50 % reduction in its turnover, the divestment would result in (i) the Group's withdrawal from a large number of markets (in particular the construction and maintenance of nuclear reactors, and the production of fuel assemblies), and (ii) lost synergies linked to the lack of opportunities for cost pooling (such as in the commercial field, fuel assemblies, and research and development and engineering). (c) A ban on acquiring stakes did not constitute an appropriate compensatory measure. Areva believed that it needed to be able to undertake […] in the future, or to enter into partnerships.

(61) The Areva Group also stressed the strategic importance of the restructuring aid for the nuclear industry and the economy in Europe: it was a direct job provider, a key player in maintaining the nuclear sector, involved in numerous segments of the nuclear value chain, and a crucial contributor to the smooth functioning of Europe's nuclear power fleet.

(62) The Areva Group also stressed that the restructuring plan was progressing well, with (i) the divestments of Canberra (finalised) and the Areva Group's share in Adwen (option exercised), and (ii) the approval by the bondholders of the partial transfer of assets from Areva SA to New Areva, and the simultaneous transfer of the bond debt to New Areva. Moreover, the approval of the Hinkley Point C project meant a favourable outlook for the plan.

3.2. Urenco

(63) Urenco was born out of political cooperation between Germany, the Netherlands and the United Kingdom. Established in 1970, its main business is uranium enrichment, and it has plants in the three countries that set it up, as well as in the United States.

(64) Urenco began by painting a broad picture of the nuclear fuel cycle value chain, and then went on to develop a three-pronged argument: first, the aid under scrutiny would significantly strengthen the Areva Group; second, the distortive effect would be felt particularly on the enrichment market to the detriment of Urenco and the other competitors in this segment; and consequently, the competitive measures proposed by the French authorities were insufficient and needed to go further.

(65) On the first point, Urenco stated that the restructuring plan failed to include any capacity reduction measures in any of the Areva Group's business lines, despite its financial difficulties and the overcapacity in its markets. New Areva would retain the same assets in the nuclear fuel cycle as in the past, and would thus be ideally placed to maintain a strong position in these markets.

(66) This was all the more evident in that the State intervention helped to repair the balance sheets of the newly established entities and wipe the slate clean of historic poor management. New Areva NP and New Areva were thus restored to a position where they had the freedom to make new investments, access financing and leverage bargaining power. New Areva's competitors, by contrast, had to bear the full costs of their past investments and could count on their profits alone for future development.

(67) On the second point, Urenco took the view that the distortions of competition would be felt over the long term in the enrichment segment, which was characterised by overcapacity and a limited number of highly capital-intensive projects.

(68) According to Urenco, worldwide enrichment capacity was significantly higher than demand […]. This overcapacity was all the more detrimental because part of the growth in demand came from countries such as China and Russia, which were largely closed to Western companies. As for the demand that could be accessed by Western companies, EDF's electro-nuclear fleet represented a major share, and it was therefore vital that the closer ties between EDF and the Areva Group did not restrict Urenco's access to EDF.

(69) The aid under scrutiny also helped the Areva Group to remain active in MOX fuel, even though this fuel was less competitive than enriched natural uranium. Without the State aid, this business would have been closed or scaled down, freeing up the markets for the Areva Group's competitors (in particular for supplying EDF, [0-25] % of whose demand could be met with MOX fuel).

(70) New Areva's repaired balance sheet would also free it up to develop trading in enrichment services (‘separative work units — SWUs’), an activity that required significant financial room for manoeuvre. This market […] could help to place New Areva in a stronger position than its non-subsidised competitors, whose financial structure, reflecting the highly capital-intensive projects in the sector, did not allow them to take this kind of risk.

(71) Lastly, Urenco argued that New Areva would continue to benefit from the advantages of vertical integration in the fuel cycle markets.

(72) On the third point, Urenco stressed that the competitive measures should be offered in the markets in which the Areva Group would operate after the restructuring, all the more so since most of these markets (mining, conversion and enrichment) currently faced overcapacity.

(73) Urenco did not share the view of the French authorities that withdrawing from the reactors business would give rise to lost synergies on such a scale that the fuel operations would be affected. The fact that there were numerous non-integrated but successful players (such as Urenco, Cameco and KAP) demonstrated that the importance of these synergies was relative. Moreover, they concerned only the supply of fuel to new reactors; […].

(74) In any event, the strategic partnership between EDF and New Areva would recreate any synergies lost. New Areva would keep a strategic stake in the joint subsidiary with EDF, which would involve a certain degree of coordination between the two groups and could be an incentive for EDF to favour New Areva. In addition, they would have the same shareholder: the French State. And closer cooperation was on the cards, as the Commission noted in its opening decision. Lastly, the disadvantages of the split would be felt primarily by New Areva NP, which would have to form new sales teams for the sale of fuel assemblies, while New Areva would keep the benefits of integration on the fuel cycle side.

(75) Accordingly, Urenco proposed the following pro-competition measures: (a) that EDF undertake to keep supply open to all fuel cycle operators; (b) that the State aid should not disproportionately improve the position of New Areva's subsidiary operating in enrichment, without ensuring that the subsidiary was kept separate from the recapitalisation (such as by ensuring that the debts associated with the construction of the Georges Besse II plant were repaid only by cash flow from that activity); (c) that New Areva be prohibited from increasing the capacity of the Georges Besse II plant at least during the restructuring period, without undermining the obligations of the Areva Group […] in relation to […] (17); (d) that New Areva reduce its MOX capacity and refrain from using its recovered liquidity to develop SWU trading activities.

(76) Urenco also wanted the French authorities to explore other pro-competition measures to be spread across all the segments, such as the sale of an activity to a new entrant, in order to reduce the synergies derived from New Areva's integration on the fuel cycle side. Lastly, Urenco stressed the importance of compliance with the ban on acquiring any undertaking during the restructuring period, unless it could be shown that such an acquisition was indispensable to the Areva Group's return to viability.

3.3. TVO

(77) TVO is a Finnish electricity generator established in 1969 and owned by other Finnish electricity undertakings and by industrial companies. TVO is the future owner of OL3, a nuclear power plant using European Pressurised Reactor (‘EPR’) technology, that is still under construction. The construction contract for this plant […] was concluded on 18 December 2003 with the Consortium. The initial date of delivery was 30 April 2009. Following numerous delays, the Consortium has now announced that delivery will take place in December 2018.

(78) TVO stressed the importance of the OL3 reactor for the energy sector in Finland and in Europe. Once it had been commissioned, OL3 would contribute 9 % of total electricity generation in Finland by 2020, and meet 14 % of total electricity demand, thereby helping Finland to increase its energy independence. In addition, OL3 was a pioneering project, which should pave the way for a ‘resurgence’ of the nuclear industry.

(79) The OL3 project was in its final stage of completion. External construction was almost complete, but some construction and fitting work was still ongoing inside the plant, particularly with respect to the nuclear island (reactor). Some 2 400 people were working on the site. TVO stressed that the OL3 project was now entering the crucial commissioning phase, which would ultimately take it to the provisional delivery date. This phase required the ongoing support of the Consortium, which had the EPR knowledge and expertise.

(80) TVO also referred to the arbitration dispute between itself and the Consortium. The total amount claimed by the Consortium was currently some EUR [0-5 billion], while the amount claimed by TVO to cover its own costs and losses came to EUR [0-5 billion] according to its latest estimates. The total combined amount claimed by the two parties to the dispute therefore came to around EUR [0-10 billion].

(81) TVO went on to explain its understanding of the Areva Group's restructuring plan, now based on ‘plan B’, i.e. transferring New Areva NP to EDF after ring-fencing the OL3 project and the resources needed to complete it, as well as leaving in this ‘legacy structure’ the components contracts and part of the Areva Group's debt.

(82) Overall, TVO supported the planned recapitalisation of the Areva Group by the French State. However, it had concerns about the potential negative impact of the group's restructuring on the OL3 project. In particular, TVO wondered about the ability of the legacy structure, in which the ring-fenced OL3 project would be placed, to maintain the resources necessary for the proper completion of the project. The legacy structure would have limited financial resources to meet what could be significant debts that were difficult to quantify at this stage.

(83) The financial resources of the legacy structure were composed of: EUR 2 billion in capital injections, EUR 2,5 billion in proceeds from the sale of New Areva NP to EDF, residual proceeds from the sales of Areva's non-strategic activities and the balance still owed by TVO to the Areva Group for the completion of the OL3 project. Mirroring these resources, the costs borne by the legacy structure were estimated to be: the costs of completing the OL3 project and the associated guarantees, the repayment of the banking debt of EUR 3,4 billion, potential guarantees to EDF for the contracts for nuclear plants whose components were to be audited, other guarantees linked to the sale of non-strategic assets and, if TVO were to win the ongoing arbitration dispute, an amount that could be as high as EUR [0-5 billion].

(84) TVO therefore questioned the ability of the restructured Areva Group to cope with the risks associated with the OL3 project, in particular the costs of completing it, and set out the implications of its doubts for the restructuring aid assessment under the Guidelines, and more specifically the degree to which the aid contributed to an objective of common interest, the long-term return to viability of the Areva Group, and the one-time-last-time principle.

(85) First, as regards the objective of common interest, TVO endorsed the argument made by France highlighting the contribution made by the aid to achieving the objectives of the Euratom Treaty, set out in Article 2(d) thereof. However, TVO stressed the need also to consider Article 2(b) and (c) of the Treaty. With respect to Article 2(c), the aid contributed to the completion of OL3, which was an important project for the development of the European energy sector and for security of supply in the Nordic countries. With respect to Article 2(b), the nuclear safety objective implied, as laid down in Article 11 of the Convention on Nuclear Safety that ‘each Contracting Party shall take the appropriate steps to ensure that sufficient numbers of qualified staff with appropriate education, training and retraining are available for all safety-related activities in or for each nuclear installation, throughout its life’. Given that TVO's expertise was mainly restricted to the operation of power plants, it was relying on the Consortium's expertise to ensure the safety of the OL3 project. However, a restructuring plan involving the ring-fencing of the OL3 project in a legacy structure risked giving rise to under-allocation of qualified staff from the Areva Group to the project, loss of back-office support from the Areva Group in France and Germany, loss of the Areva Group's technical infrastructure and potential problems with project sub-contractors.

(86) Second, as regards the return to long-term viability of the Areva Group, TVO questioned whether the capital injection into Areva SA was sufficient, whether the assumptions underlying the restructuring plan were realistic, and therefore whether the aid could ensure the long-term viability of Areva SA.

(87) Third, as regards the one-time-last-time principle, if the restructuring plan did not ensure that the Areva Group was able to meet its obligations in respect of the completion of the OL3 project, additional obligations in the form of damages associated with new delays could arise. It would then be impossible to approve new State aid because of the one-time-last-time principle.

(88) In order to address these doubts and questions, TVO stressed that any restructuring plan had to comprise: (a) operational measures to ensure that sufficient human, technical and financial resources remained available and were set aside to ensure the proper completion of the OL3 project within the deadlines agreed and in line with the performance level guaranteed in the initial construction contract, and to cover other potential costs until the end of the guarantee period and beyond; (b) sufficient financial resources allocated to the entity in which the OL3 project was to be housed, and earmarked in full for this project specifically, in order to cover the residual costs of completion and the other obligations deriving from the various contracts concluded between the Areva Group and TVO.

3.4. Siemens

(89) Together with two companies belonging to the Areva Group (Areva GmbH and Areva NP), Siemens is part of the Consortium sponsoring the OL3 project. Although the Areva Group is carrying the biggest share of the project, the members of the Consortium are jointly and severally liable to their client, TVO, for the completion of the project.

(90) While the Siemens group expressed full support for the intervention by the French State on behalf of the Areva Group, it nevertheless had a number of reservations.

(91) First, Siemens questioned whether the aid was sufficient to cover the commitments and risks borne by Areva SA: (a) Siemens estimated the Areva Group's exposure to the OL3 project at between EUR [0-5 billion] and EUR [0-5 billion] in a baseline scenario, while an adverse scenario, including (i) […] and (ii) […], could see it rise to EUR […]. (b) Siemens also pointed to the additional liabilities, such as certain banking liabilities, borne by Areva SA to the tune of EUR 3,4 billion.

(92) Siemens then wondered how the structure that was to house the OL3 project would have sufficient legal, human, financial and operational resources to carry the project to completion, if the activities and operational resources in construction were to be transferred to New Areva NP for sale to EDF. The almost inevitable outsourcing of part of the project to New Areva NP could […].

(93) Siemens also expressed concern that the Areva Group's restructuring plan designed to ring-fence OL3 in a specific structure might be blocked […] by TVO.

(94) According to Siemens, these risks could be covered by additional mechanisms such as (i) additional financial resources from the French State, (ii) a State guarantee covering any additional liabilities arising from the OL3 project, or (iii) an undertaking from the French State to finance any additional capital shortfall linked to the project.

(95) Lastly, given that Siemens and the Areva Group bore joint liability within the Consortium, Siemens was worried that it would have to cover the financial costs that the Areva Group was unable to meet, which in its view, would be incompatible with the burden-sharing principle laid down in the Guidelines.

3.5. Third party wishing to remain anonymous

(96) A final third party, who wished to remain anonymous, alerted the Commission to the distortions of competition generated by the aid under scrutiny. According to this third party, both New Areva and New Areva NP would end up stronger as a result of the restructuring, thanks to the State intervention.

(97) Undertakings in receipt of State support had a distinct competitive advantage in the nuclear industry, which was characterised by very intense competition and a demand for increasingly broad guarantees.

(98) Lastly, the anonymous third party took the view that the future cooperation between New Areva and New Areva NP would recreate important synergies that would distort competition.

4. COMMENTS BY FRANCE

(99) The comments by France are divided into four parts, corresponding to the main doubts raised by the Commission in the opening decision. First, the French authorities seek to demonstrate that the only measure which could constitute State aid is the capital injection into Areva SA and New Areva. They then respond to the Commission's doubts concerning the robustness of the assumptions underlying the business plan, the proportionality of the aid and the proposed competition measures.

4.1. Only the capital injection could constitute State aid

(100) The French authorities pointed out first that the possibility of the Areva Group granting State aid to third parties by selling its subsidiaries at too low a price (i) was not relevant in this procedure, and (ii) was entirely theoretical because it had an incentive to maximise the return on its divestments. They also pointed out that the Areva Group was receiving no aid from the divestments of New Areva NP and Areva TA, which involved State resources but were being carried out at market price.

(101) As regards New Areva NP, the French authorities explained that a specific type of governance had been introduced within EDF to ensure that EDF's interests were protected. In that context, a working group composed of independent managers had been specifically created for the acquisition of New Areva NP, in order to check whether the transaction was in the interests of EDF's shareholders and to give an independent opinion to EDF's Board of Directors. No State representative sat on the working group. On the basis of the work done by the group, which had also commissioned a valuation study from the bank Société Générale, EDF had finally taken the acquisition decision.

(102) The French authorities also explained that they had ultimately opted for a hive-down for EDF's acquisition of the Areva Group's reactors business. According to the French authorities, these new divestment arrangements had no impact on the valuation carried out by the parties and their advisers under the previous divestment plan: EUR 2,5 billion for 100 % of the capital. Irrespective of the legal arrangements for the divestment, the economic reality remained the same for EDF, which would take over Areva NP's historical activities without bearing the risks linked to the OL3 project. EDF would also be insulated against the risks linked to the components contracts. These risks had not been taken into account in the valuation of January 2016, but the insulation mechanism agreed by the parties meant the substance of the valuation need not be altered.

(103) As regards Areva TA, the valuation process had been organised in two stages, in accordance with the most common market practices: (i) between January and May 2016, the Areva Group had provided the consortium of buyers with financial, operational, legal and tax information, and organised several working sessions with the Areva TA management team; (ii) the consortium had then had access to a data room and had been able to hold question and answer discussions with Areva TA management. In this context, the Areva Group and the buyer had been assisted by 12 legal, banking and due diligence advisers.

(104) On 18 August 2016, the buying consortium described in recital 27 had submitted an offer valuing Areva TA shares at EUR [0-2 billion]. This valuation was based on the discounted cash flows method (‘DCF’) method, applied to a business plan based on assumptions agreed with the buyer. The price had been set out in the contract of sale signed on 15 December 2016.

(105) The French authorities considered therefore that the final valuation was based on commonly recognised methods, after the usual due diligence.

4.2. The Areva Group is implementing a restructuring plan to restore its long-term viability

(106) The French authorities first presented updated financial projections for New Areva. They were based on assumptions deemed to be extremely conservative: (i) the price of uranium had been revised downwards, […], (ii) the projections for mining activities had been revised downwards, (iii) an additional risk had been taken into account as regards […], (iv) a strengthened cost reduction plan had been incorporated for enrichment and conversion, (v) the cost of implementing the hive-down had been stabilised at EUR [200-900 million] over the period 2016-2025. The adverse scenario assumptions had also been revised downwards, following similar reasoning.

(107) The French authorities then addressed the various doubts raised by the Commission concerning the plan for restoring viability.

4.2.1. New Areva's business plan takes into account the consequences of the proposed divestments

(108) The French authorities argued that, given the length of nuclear industry cycles, the time horizon for the main losses of synergy extended beyond the Areva Group's financial projections (2016-2025). New Areva had a full order book for the next five to 10 years, which meant a degree of inertia in the development of its market shares. This characteristic was nevertheless common to all nuclear material suppliers; supply contracts typically extended over a period of many years, usually five to 10 years depending on the type of material (unprocessed, converted or enriched uranium) and the nature of the customer. However, the various divestments planned, especially that of New Areva NP, would undermine New Areva's competitive position in the longer term.

(109) Furthermore, the Areva Group was implementing a Performance and Competitiveness Plan, which would cushion the shorter-term impact of the divestment of New Areva NP on its structural costs. For example, the Plan aimed precisely at achieving gains in the diversification of purchases to compensate for the loss of purchase volume resulting from the divestment of New Areva NP. However, the adverse financial projections assumed that the Plan's objectives would only be [50-100] % achieved, and that therefore a negative impact would be felt.

4.2.2. Sensitivity analysis and risk reduction strategy

(110) The French authorities and the Areva Group had identified the key risk factors affecting the future of New Areva. They pointed out that the baseline scenario was already very conservative, and it was therefore unlikely that all the adverse assumptions would occur at the same time.

(111) The first of these factors was the euro/dollar exchange rate. […]. An analysis of exposures was carried out monthly and coverage was contracted as necessary to cover a minimum percentage of future payments. Furthermore, some activities, such as mining, benefited in part from natural protection against this risk: 50 % of New Areva's mining output would originate in Canada, whose currency was correlated to the dollar.

(112) The second risk concerned […]. The consequences in the adverse scenario were around EUR – [0-100 million] on accumulated operational cash flows for the period 2016-2025. The French authorities pointed out that the Areva Group was already taking a series of cost optimisation and reduction measures to limit the impact of this risk, in the form of operational improvements aimed at […]. These improvements were included in the Performance and Competitiveness Plan, which ran until 2018, […] could be sought beyond 2018 if the risk materialised.

(113) The third risk identified related to the consequences of a possible failure of […]. This was unlikely in the view of the French authorities, as […]. Nevertheless, a failure […] would affect New Areva's income.

(114) The financial projections for New Areva lastly took into account a number of contingencies […], the extent of which differed according to whether the baseline or adverse scenario was considered. These amounted to EUR [1-2 billion] in the adverse scenario over the period 2016-2025, i.e. EUR [0-1 billion] more than in the baseline scenario. The French authorities indicated the corrective action that could be taken: additional commercial or productivity measures (e.g. optimising purchases and reducing the wage bill), or adjusting the investment plan […].

4.2.3. New Areva will be able to refinance itself on the markets over the period 2015-2025

(115) In response to the doubt raised by the Commission in recital 151 of the opening decision, the French authorities stated that, in the baseline scenario, New Areva's financing needs would materialise […]. It was expected that New Areva would have re-established sufficiently good financial ratios by that time that recourse to the bond markets would be possible without calling into question the investment grade rating of the undertaking.

(116) In contrast, in the adverse scenario, New Areva would need […] of financing. However, the French authorities explained that New Areva would be able to bridge the gap […], without jeopardising the company's return to viability […].

4.2.4. Areva SA will have the resources to cover its financial needs over the period 2016-2025

(117) The French authorities had undertaken to ensure that Areva SA carried out no activities other than those specifically provided for in the restructuring plan notified to the Commission. On that basis, they considered that Areva SA would have sufficient resources to cover its financial needs.

(118) The French authorities confirmed their assumptions for the costs of completing the OL3 project over the period 2017-2025. These projections resulted in negative cash flow of EUR [0-2 billion] over the period in question. […].

(119) On the basis of these assumptions, Areva SA's business plan showed surplus liquidity of EUR [0-500 million] at the end of the period in the baseline scenario and EUR [0-100 million] in the adverse scenario. […].

4.3. The aid measure is proportionate and limited to the minimum necessary

4.3.1. The principle of fair burden-sharing is respected with regard to minority shareholders

(120) First, the French authorities pointed out that substantial provisions for losses and asset write-downs had already been set aside, and that the share price was historically low. The responsibility for past management was therefore largely borne by the minority shareholders, in proportion to their stake.

(121) Second, they anticipated that the State would be obliged by the Financial Markets Authority (‘AMF’) to make a public buy-back offer. The price offered to shareholders would be closely monitored by the AMF, which would ensure that a multi-criteria valuation method was followed.

4.3.2. The Areva Group's own contribution is sufficient, real and actual

(122) As regards the possible excess liquidity referred to in recital 172 of the opening decision, the French authorities considered that the fact that the liquidity used to implement the restructuring plan exceeded the restructuring costs did not in itself imply that the aid was not kept to the minimum. The Guidelines set a floor for the own contribution but did not establish either a ceiling or a mathematical relationship between the amount of State aid and the restructuring costs.

(123) In other words, the French authorities considered that a clear distinction should be drawn between the two distinct legal criteria. These were, on the one hand, the financing required in view of the financial projections to return to viability and, on the other, limiting the State aid to the minimum by requiring a significant own contribution to the restructuring costs. This interpretation was reflected in the Commission's practice in previous decisions (18) of accepting that the own contribution exceeded the restructuring costs without this excess liquidity meaning that the aid was not limited to the minimum.

(124) Lastly, the French authorities stressed that the Areva Group needed a liquidity cushion if the adverse scenario occurred.

(125) As regards the doubts raised by the Commission concerning the real and actual nature of the Areva Group's own contribution, the French authorities provided a number of clarifications and reiterated that the Commission had, in its previous decisions, accepted that future sales of assets were accounted for as an own contribution provided they were subject to an independent assessment of the market value of the asset (19).

(126) As regards the divestment of New Areva NP, the French authorities pointed out that independent valuations had been carried out and sent to the Commission with the notification. France also stressed the aspects which made it possible to establish the real and actual nature of the divestment of New Areva NP: first, the contract for EDF's purchase of New Areva NP shares signed on 15 November 2016; second, the fact that the conditions precedent attached to the sale did not call the sale into question. The French authorities were thus confident about the ASN's findings concerning the demonstration programme for the Flamanville 3 vessel, since all the related tests had been conducted without revealing any non-compliance in the view of EDF and the Areva Group. In addition, […] the negotiations with TVO did not call into question the divestment of New Areva NP but affected only the timetable.

(127) As regards the divestment of Canberra, the French authorities noted that it had actually been implemented since 1 July 2016.

(128) The divestment of Areva TA was being finalised, as was apparent from the information already summarised in recitals 103 to 105 of this Decision.

(129) As regards the subsidiary Elta, a unilateral purchase promise had been received from the ECA Group on 4 August 2016, and the sale had been notarised on 1 December 2016 at a price of EUR [0-10 million].

(130) It was intended that the Areva Group's stake in its subsidiary Adwen would be fully divested; a EUR 60 million floor price having been secured by the Gamesa group. The divestment was scheduled to be carried out at the beginning of January 2017.

(131) However, the divestments […] would not occur before […].

(132) Lastly, as regards the involvement of third-party investors in New Areva's capital injection, the French authorities pointed out that they had received expressions of interest from […] Japanese groups JNFL and MHI […]. The state of play in the negotiations was as follows. The MHI and JNFL groups had each submitted a firm offer […] for 5 % of New Areva's capital, valued at EUR 250 million. […].

4.4. The Areva Group proposes measures to minimise the distortions of competition

(133) According to the French authorities, the divestment of New Areva NP was a particularly significant compensatory measure because it would mean that the Areva Group simply withdrew from a large number of markets in which the EDF Group would then be the leading competitor. By divesting New Areva NP, the Areva Group was giving up one third of its assets and around half of its turnover. It was also giving up all of the advantages stemming from the integrated model it had developed over the last 15 years and was thus making a major strategic shift. In addition, the Areva Group was giving up the positive cash flows that New Areva NP would generate over the period.

(134) In support of this reasoning, the French authorities referred in detail to the various points raised by the Commission in the opening decision.

4.4.1. Quantification of the compensatory measures

(135) The French authorities pointed out that ‘measures to limit distortions of competition should address both moral hazard concerns and possible distortions in the markets where the beneficiary operates’, taking into account ‘the characteristics of the market concerned’ (20).

(136) In the case in question, any risk of moral hazard could be excluded in their view since the past losses had been borne by the existing shareholders of the Areva Group, in particular the State, through provisions and asset write-downs. Furthermore, in the light of the characteristics of the relevant markets, the State aid preserved, more than it restricted, effective competition as most of the markets in which New Areva would operate had an oligopolistic structure, which would be exacerbated by the disappearance of an operator.

(137) According to the French authorities, a comparison of the markets in the counterfactual scenario without aid clearly showed that only the continued presence of the Areva Group allowed effective competition in the market to be maintained.

(138) Thus, the divestment of New Areva NP was more than sufficient as a compensatory measure, particularly as it imposed short-term losses of synergy on the Areva Group, and in the medium-term deprived it of the particularly profitable development prospects described below in Section 4.4.2.

4.4.2. The divestment of New Areva NP penalises all of New Areva's activities over the long term

4.4.2.1. Front-end operations

(139) The integrated Areva Group had an integrated marketing and sales force for natural uranium, conversion services, enrichment, and design and manufacture of fuel assemblies, and any possible combination of these products and services. Integrating the sale of fuel assemblies with front-end services gave the Areva Group a significant information and trading advantage. Electricity generators usually had a single buyer for the supply of fuel assemblies. Because of the low substitutability of fuel assemblies, a supplier of assemblies was a key partner for an electricity generator, which was not the case of a front-end supplier, whose products and services were fungible.

(140) The French authorities gave the example of an electricity generator […] to which the Areva Group had been able to expand its sales to include front-end products and services as part of an invitation to tender for fuel assemblies. Today, [5-10] out of every 10 customers were customers of both Areva NC and Areva NP.

(141) Furthermore, the unbundling of New Areva NP's activities would make logistical optimisation more difficult. In future New Areva would have to work with New Areva NP's fuel assembly manufacturers in the same way as with all the other American and European manufacturers and would therefore miss out on logistical improvements, e.g. delivery costs would increase and its ability to fine-tune its production of enriched uranium would be reduced.

(142) The French authorities also explained that any supplier of front-end products and services supported by a supplier of fuel assemblies and reactors had an undeniable competitive advantage for tenders at the beginning of the cycle. A buyer of a new plant would generally require the contractor to supply the first reactor core as well as possible reloads. By being integrated with Areva NP, the Areva Group had automatic access to this for its front-end operations. The Areva Group was also able to negotiate better terms and conditions for its uranium, since such negotiations were generally conducted privately, without an open procedure. Finally, this type of contract allowed a commercial relationship to be established, including in markets which are difficult to access, such as China.

(143) This competitive advantage was reflected in the contracts negotiated by the Areva Group for the reactors in OL3 and Taishan 1 and 2 […]. In the case of Taishan 1 and 2, for example, […]. Such terms and conditions could not have been negotiated without the benefits of integration: by comparison, the Areva Group could only enter into contracts […].

(144) All future sales of reactors by New Areva NP thus represented missed opportunities for New Areva to sell front-end material under the best possible terms and conditions. According to the French authorities, New Areva NP would be well placed to win the projects […]. New Areva NP could also aspire to the projects […]. On account of the length of nuclear cycles, however, these lost synergies would not be felt until after the end of the period for which the Areva Group had provided financial projections.

(145) The lost synergies were particularly evident in the early life of a reactor, but they were also felt throughout its lifetime. Some electricity generators preferred to use a single tender combining purchase of uranium and conversion, enrichment and assembly services, including for reactors whose closure was already planned (end of life).

(146) Lastly, the end of integration would make it more difficult to develop an integrated chain for the recycling of reprocessed uranium, as this required a high level of logistical coordination between the supplier of fuel assemblies (New Areva NP) and the supplier of reprocessing services (New Areva).

(147) All these lost synergies would penalise New Areva and benefit its competitors. By remaining integrated, the Areva Group would have been ideally placed to take advantage of the expected market recovery, in particular because of its upgraded equipment. A sizeable market was opening up, for example, in managing end-of-life reactors for electricity generators. However, owing to the expected loss of synergies, the French authorities and the Areva Group were focusing on […].

(148) In contrast, New Areva's competitors would be able to take advantage of the opportunities created by the break-up of the Areva Group, including in the supply of fuel to new reactors. New Areva would have to take on competitors which were integrated, like Rosatom, or in the process of vertical integration, like KHNP, Toshiba/Westinghouse and CNNC.

4.4.2.2. Back-end operations

(149) The divestment of New Areva NP would be […] for New Areva's operations in recycling and processing spent fuel. MOX sales depended on a fleet of light water reactors on the market that could be operated with MOX fuel assemblies. The size of this fleet depended on the efforts New Areva NP was willing to make to propose and roll out the technology in the future.

(150) The decision by an electricity generator to ‘mox’ a reactor depended on its ability to maintain the performance of its reactor and associated costs. These two factors, in turn, depended on good cooperation between the designer of the reactor, the designer of the assemblies and the supplier of the moxed material. To date, this cooperation had been possible because of the Areva Group's ability to act as a central arbitrator between the differing interests of these entities.

(151) New Areva NP thus […] to promote an increase in the number of MOX reactors in so far as […]. Until now, being part of the same group had enabled intra-group agreements […] capable of aligning the differing interests of the two operations. This would no longer be the case in the future, and significant losses of synergy were therefore likely in the long term.

(152) The lost synergies would also be felt in the decommissioning and logistics segments. Decommissioning was highly integrated with reactor design and the supply of services to the installed base. The logistics operations were currently customers of Areva NP in two respects: for the shipment of contaminated maintenance tools and for the shipment of fuel assemblies. These intra-group services were likely to be either brought in house by New Areva NP or put out to competition in the future.

(153) Decommissioning and logistics were both dynamic markets, in which the Areva Group […].

4.4.3. The overall strategic and industrial partnership between New Areva and EDF would not allow the synergies currently associated with Areva NP's integration within the Areva Group to be restored

(154) The French authorities had provided the Commission with the Memorandum of Understanding of 28 July 2016 between EDF and the Areva Group. Annex 7 thereof concerned the creation of an overall strategic and industrial partnership.

(155) According to the French authorities, the partnership was not likely to recreate lost synergies […].

(156) […] the French authorities emphasised that New Areva NP and New Areva were about to enter into a customer/supplier relationship. […].

(157) Consequently, no strategic partnership could reproduce the strength of the intra-group trade-offs and synergies of the past.

(158) Nevertheless, in response to the Commission's objections on this point, the French authorities had undertaken to ensure that, during the restructuring period, New Areva NP — under the supervision of EDF and New Areva — would not enter into any strategic partnership or other framework agreement for commercial cooperation which was designed to benefit New Areva in cases where New Areva NP would wish to make a customer an integrated offer with a nuclear material supplier, in the markets identified in recitals 344 and 347 — supply of fuel assemblies and construction of new reactors. This undertaking did not prevent New Areva and New Areva NP from making joint offers, provided that New Areva had been chosen on the basis of commercial and technical criteria.

4.4.4. The French authorities undertake to ensure that the Areva Group takes the behavioural measures referred to in point 84 of the Guidelines

(159) While reiterating the importance of partnerships in the nuclear field, the French authorities had undertaken that, during the restructuring period, the Areva Group (Areva SA and New Areva) and the companies under its control would refrain from acquiring, directly or indirectly, shares in any company which was not already under its control, with the exception of projects indispensable for restoring the Areva Group's viability. This undertaking did not apply to shares acquired by New Areva and the companies directly or indirectly controlled by it for the purposes of the financial management of (i) decommissioning funds which the Areva Group was obliged to manage under a legal or regulatory obligation, (ii) pension funds for Areva Group staff, (iii) liquidity investments. They had also undertaken to ensure that the Areva Group (Areva SA and New Areva) would refrain from publicising the support it received as a competitive advantage when marketing its products and services.

4.5. Observations by the French authorities on the comments by interested parties

4.5.1. Comments by TVO and Siemens

(160) The French authorities considered that Areva SA would be able to finance all its forecast requirements.

(161) On the one hand, it was incorrect to suggest that the Areva Group was jeopardising the smooth finalisation of OL3 through the restructuring plan. The success of the project was essential for all parties to the restructuring: Areva SA, of course, but also New Areva (for the supply of fuel) and New Areva NP (for the demonstration value of this first EPR). Areva SA would therefore have all the necessary operational resources — which would not be carved out and diverted immediately to New Areva NP — to successfully complete the project. This should dispel all TVO's doubts on this matter.

(162) In particular, the French authorities stressed the existence of […] specific cooperation between Areva NP and New Areva NP, allowing Areva NP to call on New Areva NP as soon as necessary […].

(163) On the other hand, the needs of Areva SA had been properly estimated by the French authorities, in a conservative manner.

(164) As regards the costs of finalising OL3, the Areva Group's estimate was comparable, or even more conservative, than that of TVO, except for […], but the French authorities rejected […], which in their view completely lacked credibility. The French authorities did not comment on the estimate of Siemens, which could not be analysed in detail at that level of aggregation.

(165) As regards the damages which might result from an unfavourable outcome of the arbitration proceedings, […].

(166) According to the French authorities, it would be entirely inappropriate and contrary to the objectives and spirit of the rules on restructuring aid to increase the amount of aid in order to guarantee to third parties the payment of damages which they might be awarded in an action brought against the beneficiary of the aid. First, this type of contingency did not fall within the definition of the risks to be taken into account in establishing the adverse scenario. The Guidelines referred only to macroeconomic and trade factors. Second, such an increase in aid would be contrary to the principles of proportionality and limitation of aid to the strict minimum. Third, in practice the arguments of TVO and Siemens would result in the State guaranteeing the solvency of their jointly liable debtor/co-debtor, which would constitute State aid to Siemens and TVO. The Commission had explicitly acknowledged that State guarantees for hypothetical disputes constituted State aid (21) and had already excluded the principle of their compatibility (22). Fourth, the arguments of Siemens and TVO were inconsistent because they did not take into account the possibility of a positive outcome for the Consortium. Fifth, in the event of an unfavourable arbitration outcome, […].

(167) In the case of […]. The French authorities had put forward several arguments.

(168) As regards […].

(169) Furthermore, the regulatory problems associated with carbon segregation were in the process of being settled in EDF's existing fleet. The ASN had authorised the restart of all the reactors operating in France with steam generators manufactured in Le Creusot (in which carbon segregation issues had been identified), and eight of the 12 reactors with steam generators manufactured by the Japanese partner of Areva NP.

(170) Nor had any anomaly been found to date in Taishan's primary loop. In any event, the contract stipulated that the contractual liability of the Areva Group would be capped at EUR [0-1 billion] for the Taishan project.

(171) […], any request would require evidence of definite damage, i.e. a genuine safety flaw in a component leading to a high risk of failure.

(172) As regards all matters involving the civil liability of the Areva Group, the French authorities had informed the Commission that […].

(173) As regards the argument by Siemens that the estimated resources of Areva SA should enable it to cover a maximum theoretical amount covering all the theoretically possible risks, the French authorities emphasised that the examples of the Commission's decision-making practice on which Siemens based its reasoning all came from procedures opened under the temporary framework for aid to restructure financial institutions in the context of the economic and financial crisis. This reasoning by analogy advocated by Siemens was therefore invalid in this case, in the view of the French authorities. They also argued that the worst-case scenario under the Guidelines could not cover all the theoretically possible risks but had to remain within the sphere of possible events.

(174) Lastly, in reply to the argument by Siemens that an under-capitalisation of Areva SA would contravene the principle of adequate burden-sharing set out in the Guidelines, the French authorities noted that the principle applied only to shareholders and subordinated creditors, who should not be unduly protected by the effects of the aid.

4.5.2. Comments by Urenco

(175) First, the French authorities pointed out that Urenco had played a large part in the overcapacity which had characterised the uranium enrichment market since Fukushima. Urenco's share in global enrichment capacity had doubled between 2007 and 2015, as the Areva Group's share had decreased.

4.5.2.1. On the alleged distortions of competition

(176) The French authorities then showed that the State aid would not create any distortion of competition but, on the contrary, would help to stimulate competition in the long term.

(177) The relatively modest presence of the Areva Group in the decommissioning and logistics markets explained why the aid would not distort competition. Similarly, the Areva Group was the only global player operating a reprocessing plant on an industrial scale, and its continued presence in this segment could not, therefore, harm competition that did not exist.

(178) In the mining, conversion and enrichment segments, the market structures were highly concentrated; the Areva Group was also the only sizeable European group in the mining and conversion segments. The disappearance of the Areva Group from these segments would therefore undermine competition by helping to increase concentration even further.

(179) Furthermore, the Areva Group would not be unduly strengthened by the State aid in the specific enrichment segment. First, the French authorities pointed out that the capacity of the Areva Group to sign contracts for enrichment services was not linked to its credit rating, but to other characteristics such as supply price, contractual flexibility, quality of logistics, etc. Second, the enrichment subsidiary of the Areva Group (Société d'Enrichissement du Tricastin — ‘SET’) was already profitable and financially independent, […]. […], this activity would contribute more to the return to viability of the restructured Areva Group than the amount of aid it received itself. Third, Areva had not been active in the trading of SWUs for at least 10 years, […].

4.5.2.2. On the compensatory measures

(180) The French authorities referred to the arguments set out in their comments of 12 September 2016 to point out that the disappearance of synergies linked to the integrated model would penalise not only operations at the beginning and end of the cycle but also, more generally, all operations throughout the life cycle of the reactor. The divestment of New Areva NP was therefore a sufficient measure. For the reasons set out in those same comments, the strategic partnership with EDF would not recreate the synergies, and the fact that the French State was a shareholder in both groups changed nothing, since they were independent economic units with their own decision-making power.

(181) As regards, in particular, the different measures advocated by Urenco, the French authorities argued that: (a) Urenco's request for EDF to undertake to launch open calls for tenders was unjustified both in law and in fact. First, the French State could not impose anything on EDF, which was a third party in this State aid procedure. Second, EDF as an independent economic entity had no incentive to favour New Areva. Lastly, the precedent from the Framatome/Siemens/Cogema concentration was irrelevant because that measure had concerned fuel assemblies, for which there were strong (including regulatory) barriers to entry, and because the State was no longer legally in a position to make any undertaking on behalf of EDF; (b) the ring-fencing of enrichment activities was superfluous in so far as SET was already financially independent. In addition, such a measure would give rise to insuperable operational difficulties owing to the degree of operational overlap between the subsidiary and other entities within the Areva Group; (c) the prohibition on expanding the capacity of the Georges Besse II plant was inconsistent with the undertaking given by the Areva Group, […]. The French authorities had therefore undertaken to ensure that, during the restructuring period, the Areva Group did not increase the capacity of the Georges Besse II plant, with the exception of acquiring and installing centrifuges as set out in its existing agreements […]; (d) the divestment or the limitation of the MOX production operation were inappropriate. First, this operation would be weakened by the divestment of New Areva NP. Second, since MOX and UOX fuel were not substitutable, the distortion of competition was minimal for competitors like Urenco offering only UOX. Third, the production of MOX was vital for the survival of the nuclear processing sector. Fourth, Urenco's assertion that MOX production was not profitable compared with UOX disregarded the numerous positive externalities associated with its production; (e) additional divestments, for example in logistics, would undermine the restoration of New Areva's long-term viability and were all the more unjustified as the distortions created by the aid were minimal in these markets.

5. ASSESSMENT OF THE AID

5.1. Existence of aid

(182) The Commission has to assess whether the measures covered by this procedure constitute State aid within the meaning of Article 107(1) TFEU.

(183) Under Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

(184) The Commission considers that a public measure can thereby be classified as State aid if all of the following conditions are met: (i) the measure must be granted by the State or through State resources, (ii) it must confer an economic advantage on its recipient; (iii) that advantage must be selective, and (iv) the measure must distort or threaten to distort competition and be liable to affect trade between Member States.

5.1.1. The French State's subscription to the capital injections into Areva SA and New Areva

(185) Although these two interventions are seemingly separate, the Commission considers that the State's subscription to the capital injections into Areva SA and New Areva respectively must be regarded as a single aid measure made available to Areva. It is apparent from the analysis of the difficulties and indebtedness of the Areva Group that as a whole it needs capital. The fact that this overall need for recapitalisation is subsequently broken down between Areva SA and New Areva is nothing more than an implementing arrangement for recapitalising Areva.

(186) This subscription is attributable to the State and is granted through State resources. The two capital injections will be subscribed to by the State directly through its own resources.

(187) This confers an economic advantage on the Areva Group. On the one hand, this investment improves the position of the Areva Group by enabling it to meet a significant part of its debts. On the other hand, the Areva Group would not have been able to obtain such capital under normal market conditions, since no private investor would have subscribed in those circumstances to any capital injection into the Areva Group in view of its serious financial situation. The two third-party investors MHI and JNFL will not subscribe to the capital of the Areva Group in the same way as the French State, since their investment will concern only one of the two entities of the restructured Areva Group (New Areva), and for a minority stake of […] %.

(188) The advantage thus granted to the Areva Group is selective. The State's subscription to these capital injections is an ad hoc measure which exclusively benefits the Areva Group for the purposes of its restructuring.

(189) Lastly, the advantage granted to the Areva Group through the State subscription to the capital injections is liable to affect trade between Member States. The different markets on which the Areva Group operates are characterised by a high level of trade between these States. In this regard, the Commission has already had cause to regard the nuclear markets as at least pan-European (23). In addition, the advantage granted to the Areva Group provides it with additional financial resources enabling it to remain active on the market. The measure is therefore liable to distort competition

(190) In the light of the above, the Commission concludes that the French State's subscription to the capital injections in Areva SA and New Areva constitutes State aid within the meaning of Article 107(1) TFEU, in favour of the Areva Group, amounting to EUR 4,5 billion.

5.1.2. Divestments carried out under the restructuring plan

(191) In the opening decision, the Commission noted that the various divestments envisaged by the Areva Group could constitute aid if they were not carried out at market price. They would constitute aid either to the buyer, if the sale price were considered excessively low, or to the seller (the Areva Group) if the sale price were considered excessively high — aid to the seller being relevant only in the event of divestment to another public entity, provided that the criteria of imputability and State resources are met. The Commission notes that, according to point 63 of the Guidelines, divestments comprising an aid element to the seller (the Areva Group) cannot be taken into account in calculating the own contribution.

(192) As regards divestments to non-public third parties (Canberra, Elta, Adwen), the Commission acknowledges that aid from the Areva Group to these buyers, by means of an unduly low price, is unlikely since the Areva Group has every incentive to maximise the proceeds from these divestments. Moreover, the divestments took place through competitive processes likely to maximise the price obtainable by Areva.

(193) In contrast, in the case of the divestments of New Areva NP and Areva TA, it could not be ruled out a priori that EDF or the public consortium buying Areva TA might make an offer at an unduly high price so as to benefit the Areva Group. Nevertheless, the Commission can conclude, on the basis of the reasoning set out below in parts 5.1.2.1 and 5.1.2.2, that the divestments are being carried out at market price, which rules out an economic advantage within the meaning of Article 107(1) TFEU.

5.1.2.1. Sale of a majority stake in New Areva NP

(194) The sale to EDF of a majority stake in New Areva NP was not the subject of an open, transparent and unconditional call for tender. However, the private sale of controlling stakes is common practice in the market. As regards New Areva NP, account should also be taken of its area of business and links with the operation of nuclear power plants, where the sale of controlling stakes by tendering procedure is not common market practice. In addition, before agreeing to the sale of the stake, the parties to the transaction had recourse to independent studies, so as to determine the sale price for themselves. While it is true that ultimately the actual selling price is the result of a negotiation between a willing seller and buyer, the fact remains that the use of such studies for negotiation prior to agreement on price is also common market practice, which a prudent investor would follow (24).

(195) As regards the content of the studies, following an evaluation of the value of the shareholding based on a multi-criteria approach, EDF's financial adviser, the bank BNP Paribas, delivered the following opinion on 24 July 2015: ‘On the basis of the information on and characteristics of the operation referred to above, at present the price of EUR 2,7 billion for 100 % of the capital of Areva NP proposed by EDF in the context of the operation is, in our view, reasonable for EDF from a strictly financial point of view.’ EDF then contracted the bank Société Générale to carry out the due diligence. The French authorities have provided the Commission with a detailed presentation of the results of this due diligence, dated January 2016, in which Société Générale confirms the valuation renegotiated between the parties of EUR 2,5 billion for 100 % of the capital.

(196) The valuation carried out by Société Générale is very detailed (127 pages of analyses) and is based on the DCF method, which is generally accepted in financial matters.

(197) First, Société Générale reworked with EDF the business plans produced by the Areva Group for each of the five business lines within the scope of New Areva NP: installed base, fuel assemblies, manufacture, major projects, and other (auxiliary functions, contingencies, etc.). These business plans run until 2023. The adjustments relate to many assumptions affecting a large number of New Areva NP projects. […] (25).

(198) On the basis of the business plans, the enterprise value of each business line is calculated using a DCF method. Société Générale applies a different weighted average cost of capital (‘WACC’) for each business line, based on the risk specific to each of these activities. This WACC is estimated on the basis of a fairly detailed Capital Asset Pricing Model (CAPM) methodology: for each business line, a WACC is estimated for each country of operation, then a weighted WACC is calculated from these various geographical WACCs. The risk-free interest rates are derived from multiple sources (SG Research, Bloomberg, Associés en Finance), the country risk premiums are based on the work of Professor Damodaran of NYU Stern School of Business, and the cost of debt is based on the risk premium of the bonds of comparable undertakings. These comparable undertakings, selected by Société Générale on the basis of different criteria specific to each business line, are also used to determine the beta of each activity. The sample of comparable undertakings consists of seven listed companies for the fuel business line, five for the installed base, six for manufacturing and six for major projects. The beta values obtained are corroborated by comparison with the beta predictions provided by the Barra multi-factor model.

(199) The analysis of the value of each business line based on the DCF method also includes a terminal value after 2023. This was calculated on the basis of Gordon Shapiro's method by retaining a normalised cash flow considered representative of the cash flow generation capacity of the activity. An assumed perpetuity growth rate of zero was chosen for all business lines.

(200) Sensitivity analyses were carried out on these enterprise values by varying parameters such as the WACC or EBITDA margin. The net debt of each business line was then subtracted from these enterprise values in order to arrive at the value of the capital. The sum of these various amounts per business line gives the total value of the capital of New Areva NP. Société Générale considered that an EBITDA multiple of […] could be inferred from this valuation. This EBITDA multiple seems reasonable since it is below the average and median EBITDA multiples observed for comparable transactions — Société Générale having selected a sample of 19 transactions representing the various activities of New Areva NP.

(201) The value of the various parameters used for the DCF method, as well as the implicit EBITDA multiple, are further corroborated by comparison with the averages and medians taken from the study of comparable undertakings referred to in recital 198.

(202) In the light of the above, the Commission confirms the finding in the opening decision that the valuation carried out by EDF and its advisers is based on the available objective, verifiable and reliable data, which reflect the economic situation at the time the transaction was decided. This finding was not challenged by any third party during the investigation. The new developments since then, such as recourse to a hive-down or the discovery of risks relating to components contracts, are not likely to affect the result since EDF was careful to fully insulate itself against such risks, in the manner described in recital 30.

(203) On the basis of this valuation of EUR 2,5 billion for 100 % of the capital, Société Générale showed that EDF could expect an internal rate of return (‘IRR’) from the investment of [0-20] % in the central scenario. This scenario postulates an exit (for the calculation of the terminal value) in […], and an exit multiple equivalent to the entry multiple, i.e. […] x the EBITDA.

(204) This IRR must be compared with the cost of capital weighted according to the different sectors of New Areva NP. In the case in question, Société Générale's calculations, which are based on the objective criteria listed in recital 198, provide the following indications for each business line: [0-10] % for fuel, [0-10] % for the installed base, [0-20] % for major projects, [0-10] % for production. These estimates seem reliable in that they are based on a commonly agreed methodology and sources, similar to those which the Commission itself has used in other cases, supported by the General Court where appropriate (26). Weighting these estimates with the relative share of each business line in the turnover of New Areva NP produces a weighted average cost of capital of [0-10] %. The IRR that EDF can expect from the investment in New Areva NP is therefore above the cost of capital in the sector in question, including under a number of negative scenarios taken into account in the sensitivity analysis (concerning the year and the exit multiple) carried out by Société Générale.

(205) In the light of these objective aspects, the Commission concludes that the divestment of New Areva NP is being carried out under normal market conditions without conferring any economic advantage on the buyer (EDF) or the seller (the Areva Group), and therefore rules out the presence of State aid.

5.1.2.2. Divestment of Areva TA

(206) The French authorities have clarified the arrangements for divesting Areva TA and provided evidence to justify the price of EUR [0-2 billion] for 100 % of the capital. This evidence was summarised in a study by the financial consultancy firm […] dated 6 December 2016.

(207) In the context of its due diligence, the buying consortium has developed its own business plan for Areva TA based on the seller's perspective, adapting the underlying assumptions of the plan to the best of its knowledge.

(208) The Commission has reviewed the projections and assumptions used for this valuation and considers that it fulfils the quality requirements of a prudent investor. It is based on available objective, verifiable and reliable data which reflect the economic situation at the time the transaction was decided.

(209) In the light of this, the Commission considers that the divestment of Areva TA is being carried out under normal market conditions without any economic advantage being conferred on the buyer or the seller (the Areva Group), and therefore rules out the presence of State aid.

5.2. Compatibility of the aid with the internal market

(210) The French State's subscription to the injections of capital into Areva SA and New Areva constitutes State aid within the meaning of Article 107(1) TFEU that France is planning to grant to an undertaking, the Areva Group, which is active in the areas covered by the Euratom Treaty.

(211) The Euratom Treaty established the European Atomic Energy Community, specifying the necessary instruments and allocating responsibilities with a view to achieving objectives that include nuclear safety, energy independence and the diversity and security of energy supplies (27).

(212) As the Commission has acknowledged in previous decisions (28), the promotion of a successful nuclear energy sector is a fundamental objective of the Euratom Treaty, and therefore also of the European Union. As set out in the preamble to the Euratom Treaty, the Commission, as an institution of the European Atomic Energy Community, is required to create the ‘conditions necessary for the development of a powerful nuclear industry which will provide extensive energy resources’. This obligation must be borne in mind when the Commission exercises its discretionary powers to authorise State aid under Article 107(3)(c) and Article 108(2) TFEU.

(213) The TFEU sets out the conditions under which aid can be declared compatible with the internal market. Under Article 107(3)(c) TFEU, the Commission can authorise State aid if it is granted to promote the development of certain economic sectors and does not adversely affect trading conditions to an extent contrary to the common interest. Given the nature of the measure in question, the Commission will establish whether it is compatible with the provisions on restructuring aid set out in the Guidelines, mindful of the doubts expressed in the opening decision as well as the comments from France and interested third parties.

5.2.1. Eligibility of the Areva Group for restructuring aid

(214) At the end of 2014, which was when the restructuring of the Areva Group began, the Group had negative equity totalling EUR – 244 million. New losses have been recorded since then, meaning that the Areva Group's equity situation deteriorated further in 2015. Areva Group's total equity stood at EUR – 2,3 billion on 31 December 2015.

(215) Given the presence of negative equity, the criterion set out in point 20(a) of the Guidelines is fulfilled. The Areva Group must therefore be considered an undertaking in difficulty, making it eligible for restructuring aid.

5.2.2. Contribution to a well-defined objective of common interest

(216) The Euratom Treaty sets out the following objectives of common interest: nuclear safety, energy independence and the diversity and security of energy supplies. Under Article 2(d) of the Euratom Treaty, the Euratom Community must ensure that all users in the Community receive a regular and equitable supply of ores and nuclear fuels. By preventing the Areva Group's demise, the aid under consideration contributes to the achievement of these different objectives.

(217) The aid enables the Areva Group, a key player in Europe's nuclear industry, to survive. The Areva Group is the leading European operator in the uranium mining market and the only European operator active in the uranium conversion, fuel recycling and MOX production markets. It has the expertise required to operate, in optimal safety and security conditions, a number of ‘basic installations necessary for the development of nuclear energy’ within the meaning of Article 2; this includes sites and facilities such as Comurhex II, La Hague and Melox. Lastly, the Areva Group is a key European operator in terms of the production of nuclear fuel for materials testing reactors and of target materials to be irradiated to produce radioisotopes for medical use.

(218) Its demise would therefore have immediate consequences in terms of nuclear safety, energy independence, and the diversity and security of Europe's energy supplies.

(219) The Guidelines also set out the conditions under which restructuring aid contributes to an objective of common interest. This is the case if the aid aims to prevent social hardship or address market failures that would be created if the undertaking left the market and its activities no longer existed.

(220) Of the market failures listed in point 44 of the Guidelines, those that apply to the case in question are, depending on the specific markets, (i) the risk of disruption to an important service which is hard to replicate and where it would be difficult for any competitor simply to step in, (ii) the negative consequences of an undertaking with an important systemic role in a particular sector leaving the market, and (iii) the irremediable loss of important technical knowledge or expertise. The way in which the aid makes it possible to prevent these risks or negative consequences is examined below, in recitals 223 to 226.

(221) Furthermore, the Commission must also consider other scenarios not involving a complete market exit, such as the continuation of certain activities after liquidation without State aid. The Commission must be satisfied that the objectives of common interest would not be achieved in the same way in these counterfactual scenarios that do not involve aid. This assessment is covered in part 5.2.4 of this Decision.

(222) As regards the consequences of the Areva Group exiting its markets, the Commission notes the following.

(223) As regards the mining business, given that the Areva Group is the main European operator in the sector, its exit from the market would result in Europe's uranium being principally supplied by non-European operators, including the Russian (Rosatom) and Kazakh (KAP) operators, which account for around [30-50] % of the market (29). It appears unlikely that any European or even Western operator (such as the Canadian operator Cameco) will strengthen its mining capacity to the extent required to achieve the objective of ensuring the diversity and security of the European Union's supply. The Areva Group's exit from the market could also lead to an increase in the price of uranium in the long term, given the concentration in that market. In this regard, the Areva Group has an essential systemic role in terms of Europe's uranium supply.

(224) As regards the conversion business, the Areva Group is the last European operator active in this market. Its exit from the market would have serious negative consequences. Firstly, it would jeopardise the European Union's energy independence, given that the conversion of uranium is an indispensable link in the nuclear energy production chain. Secondly, it would reduce competition in that market, which is already highly concentrated, and this could give rise to additional costs for European electricity generators, and consequently for European consumers. In this regard, the Areva Group has an important systemic role in terms of the European fuel-cycle business and, if it exited the market, there w