By Inti Landauro

PARIS--The board of French nuclear engineering group Areva SA (AREVA.FR) approved a 5 billion euros ($5.5 billion) capital increase as part of a plan to rescue the company from several years of losses.

The French government, which owns more than 85% of Areva shares, will take part in the capital increase as the leading shareholder, Areva said in a statement.

The injection of cash into Areva is part of a broader plan by the French government to revive the country's nuclear sector that was once a source of national pride. In recent years, Areva has lost ground to competitors from Russia, South Korea and the U.S. while demand for new nuclear reactors has plummeted.

Areva has lost money for the past four years, dogged by a tough market for nuclear reactors since the Fukushima disaster in Japan in 2011. These market conditions have made it more difficult to recover from a number of poor investment decisions over the past decade and big cost overruns on projects in France and Finland.

As part of the rescue plan, the French government has brokered the sale of a controlling stake in Areva NP, the group's nuclear-reactor-making unit, to French electricity utility Electricite de France SA (EDF.FR), in which the government owns more than an 80% stake.

EDF agreed to value Areva NP at EUR2.5 billion, though the valuation will be adjusted upwards or downwards depending on how the unit performs in the future.

Areva officials have said the company needs as much as EUR7 billion to balance its accounts.

Six months ago, EDF said it had agreed to buy at least 51% of Areva NP, as the unit is called, while Areva said it would keep a maximum 25%. Both companies said they would seek other partners. China National Nuclear Corp. said late last year that it was interested in taking a minority stake in Areva.

-Write to Inti Landauro at inti.landauro@wsj.com

(END) Dow Jones Newswires

January 28, 2016 02:59 ET (07:59 GMT)