“We have created a unique treasury interface to serve all parts of the group”
Financial Operations and Treasury Manager, Areva
Lettre du Trésorier
You have worked mainly in industry, I believe?
After completing my studies in chemical engineering at ENSIC in Nancy, and my postgraduate in economics at the Institut Français du Pétrole, I joined BP and stayed with them for 16 years in various financial and managerial posts before taking on the role of treasurer in 1985. This period saw the creation of the first derivative hedging instruments, foreign exchange options, interest-rate swaps and notably, the launch of the first treasury notes, BP having been the first to issue in Paris. Five years later, I joined Cogema as treasurer. When Areva was formed in 2001 from the merger of Cogema, Framatome and CEA Industrie, I was appointed financial operations and treasury manager. In 2004, the treasury department absorbed the transmission and distribution activities acquired from Alstom. In 2007, Areva Group’s revenues amounted to €12bn and the order book was worth €39bn. Areva is now the world leader in the nuclear cycle and one of the three major players in transmission and distribution with 71,000 employees in 43 countries with a sales network in 100 countries.
How is the 33-strong treasury department organised?
BL: Areva covers a very extensive chain of industry and services including mining extraction to produce the uranium concentrate or ‘Yellow Cake’, which is then chemically treated and enriched, construction and maintenance of nuclear power plants, processing of used fuels in The Hague, transmission and distribution of electricity and high & low tension engineering, not forgetting the wind-power activities in Brazil and biomass in India, Brazil and the USA. Hence the varied operating cycles, the 25 currencies used, the risks arising from the usage of raw materials such as nickel and copper, long-term contracts of large single amounts but also smaller, shorter and recurring contracts. This diversity meant that we needed to set up a unique treasury interface to serve all parts of the group right from the start.
So you do not have any local treasury functions?
BL: No. That would make managing it more reactive and close to operations. The front office with the trading room handles foreign exchange transactions and hedging of commodities, price guarantee transactions for invitations to tender and stock exchange transactions. This represents around 25,000 transactions per year, covering both transactions with the units and the ones we turn around on the market. In addition, the front office manages the short- and medium-term assets connected with commercial positions. Also, through mandates or mutual funds, we manage a dedicated portfolio in the company’s balance sheet for end-of-cycle transactions (reorganisation and dismantling of our own manufacturing and treatment plants at the end of their technical lives). These long-term assets amount to €2.5bn and we have €2.5bn in accounts receivable from our clients who are required to finance their share. This form of restrictive management has been very well-defined since the June 2006 framework legislation on radioactive waste which requires companies to secure all the liabilities against assets by 2011.
Lastly, we negotiate the bank guarantee lines for the whole group and provide corporate finance through syndicated credits and local finance in countries including India, Brazil and China, and have recently carried out project finance activities.
And more traditionally, you manage banking flows?
BL: Yes, but this does not include making supplier payments. These are decentralised at payment centres run by the local finance divisions. The back office is limited in this respect to negotiating the banking terms and recommending payment methods. It is primarily responsible for netting, cash pooling, processing market transactions, including pre-accounting, and provides internal finance for 170 subsidiaries. For pragmatic reasons, we have several cash pooling systems based on the requirements and volumes for each country. In France, we mostly do direct cash pooling generating the balancing ourselves. Elsewhere in Europe, in the USA and in Canada, we have ZBA banks. We aim to use one cash bank per country. Overall, we have just over 20 banking groups to cover around 80% of the needs.