New Nuclear Plants To Drive Activity at Assystem from 2028
Revenues from New Nuclear Plants Will Accelerate in 2028
Assystem expects new nuclear plants to accelerate its activity from 2028 onward. The company that the French government intentions to build 14 nuclear reactors will only drive plant engineering services, when the plants move into the construction phase.
France currently has 56 nuclear reactors in 18 nuclear plants and is the second-largest nuclear energy producer after the US. 70% of its electricity mix comes from nuclear power. In February 2022, French President Emmanuel Macron announced plans to build 14 new nuclear reactors to replace aging ones. The new builds could dramatically impact Assystem’s revenues, which had EUR 326m in nuclear engineering revenues in 2021. The company currently works on less than a handful of new builds (Olkiluoto Island in Finland, Hinkley Point in the U.K., Flamanville in France, and Akkuyu in Turkey). We estimate that each new reactor could bring Assystem EUR 50m in engineering revenues. Potentially, Assystem could double its nuclear revenues in five years from its French and UK (Sizewell) operations only.
Assystem also provides maintenance engineering activities, in particular, helping governments to lengthen the duration of nuclear reactors from currently 40 to eventually 60 years. The maintenance activities represented for Assystem EUR 60m in revenues and 700 employees. Assystem expects them to increase as the French government lengthens the life of existing reactors while it builds new ones. Finally, Assystem also dismantles aged nuclear reactors.
Middle East Slows Assystem in 2022
Assystem’s nuclear engineering looks bright. In the short term, however, Assystem hasn’t had a stellar performance. H1 2022 nuclear engineering revenues were up organically by 4.2%, a clear slowdown from 2021 (+9.8%). The company suffered from the end of the K.A.CARE contracts in KSA and ENEC in the UAE. Assystem won a follow-up contract with K.A.CARE, which would drive revenues in Q4 2022 and 2023.
ET&I Resumes Growth, Finally
In the meantime, ET&I, Assystem’s infrastructure engineering unit, has finally reached the inflection point where it will drive growth. Assystem divested several ill-performing units (e.g., its healthcare unit to Expleo). It also finalized the sale of its staffing unit, MPH, to its management while retaining a minority stake. Assystem’s investment in KSA, through the acquisition of Radicon in 2014, is paying off with the K.A.CARE and the Neom contract. The Neom program has a budget of USD 500bn and is promising for Assystem.
In short, we expect Assystem will rely on two growth engines for the next few years. Growth should not be dramatic but be steady, in the 5-10% organically we expect. Assystem says it has no difficulty signing contracts. Its challenge is to recruit and keep its attrition under control (15-20%). That’s a nice problem to have, we think.