By Geert De Clercq
PARIS (Reuters) - French state-controlled nuclear group Areva (PA:AREVA) said on Tuesday it plans to cut capital spending by 200 million euros (157.30 million pounds) over the next two years to try to strengthen its financial structure.
The savings measures, which include new asset sales and a new bond, could stave off a credit rating downgrade by Standard & Poor's. S&P said last month it was considering lowering Areva's BBB- long-term debt rating by one notch to non-investment grade.
Areva said gross capital expenditure in 2015-16 will be brought back to less than 1 billion euros per year on average, from a budget of less than 1.1 billion announced in August.
The company had also announced in August it would cut back its 2014 budget to 1.1 billion euros, from 1.4 billion in 2013.
From 2007 to 2011 - the year the Fukushima disaster brought a global boom in nuclear investment to a halt - Areva had an average capital layout of 2.3 billion euros per year.
"These new measures reflect the group's determination to continue to strengthen its financial structure," Chief Executive Luc Oursel said on Tuesday.
S&P's decision on Areva's credit rating is expected this week, possibly on Wednesday. The agency had said on Sept. 9 it would decide within 30 days, but a source with knowledge of the situation told Reuters the 30 days was "not a hard deadline".
S&P's downgrade warning came after Areva posted a 694 million euro first-half loss on Aug. 1 and cut its 2014-2016 core earnings and cash flow targets. Areva stock fell 20 percent that day, the biggest fall since Areva was formed in 2001.
Areva also said on Tuesday it would dispose of non-strategic activities or minority stakes in projects worth at least 450 million euros by the end of 2016, including the sale of its stake in the Euronimba iron mine in Guinea.
To help prepare for the refinancing of upcoming debt due, Areva will also launch a hybrid bond in the near future.
Areva's net financial debt stood at 4.73 billion euros in June. It has modest debt repayment needs of around 300 million euros this year and next, but it has to pay down more than 1.2 billion euros in 2016 and more than 800 million euros in 2017.
FUKUSHIMA IMPACT
Areva has been on the defensive since 2011, when it had to take a 2.4 billion euro charge on an African uranium mine investment gone awry and the global nuclear market was hit by the Fukushima disaster. Billion euro cost overruns on a reactor project in Finland have further undermined its balance sheet and forced Areva to cut costs and sell assets.
In August, Areva increased its cost-cutting target to 1.2 billion euros in 2016 from an initial target of 1 billion euros in 2015. It announced no further cost cuts on Tuesday.
In 2012-13, Areva sold 1.2 billion euros worth of assets, but it is running out of non-strategic assets to sell.
In June 2013, an attempt to sell its U.S. nuclear radiation measurement unit Canberra to a private equity firm for an estimated 310-350 million euros fell through. An attempt to sell its solar activities this year also failed and Areva closed the loss-making business and took a 373 million euro write-down.
With costs and investments already cut to the bone, Areva may need a capital injection from the state - which owns 87 percent of its capital - or an industrial alliance.
Weekly Le Journal du Dimanche said on Sunday Areva needs 2-3 billion euros in new funds and that the state could push Areva into an alliance with utility EDF (PA:EDF).
Two sources close to the French government told Reuters that a capital injection was not being studied at the moment. A source familiar with the situation said a linkup with EDF was not under consideration.
France's socialist government, frustrated with its lack of control over Areva, said in May it plans to reform the firm's governance structure before the end of this year.
It has not indicated whether it wants to keep Oursel at the helm, but several French media have speculated that Oursel might be replaced with Chief Operating Officer Philippe Knoche.
(1 US dollar = 0.7920 euro)
(Additional reporting by Leigh Thomas and Jean-Baptiste Vey; editing by Andrew Callus and Mark Heinrich)