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Cablegate: France Aggressively Promotes Nuclear Energy Ties

VZCZCXRO1617
RR RUEHDU RUEHJO
DE RUEHSA #0747/01 0601239
ZNR UUUUU ZZH
R 011239Z MAR 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 8470
INFO RUEHMO/AMEMBASSY MOSCOW 0644
RUEHFR/AMEMBASSY PARIS 1013
RUEHUL/AMEMBASSY SEOUL 0195
RUEHTN/AMCONSUL CAPE TOWN 3998
RUEHDU/AMCONSUL DURBAN 8615
RUEHJO/AMCONSUL JOHANNESBURG 6288
RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 PRETORIA 000747

SIPDIS

SENSITIVE BUT UNCLASSIFIED
SIPDIS

DEPARTMENT FOR ISN/NESS/CMARTIN
DOE FOR NE/AHAN
COMMERCE FOR DOC/ITA/USAFCS/3004

E.O. 12958: N/A
TAGS: ECON ENRG IAEA KNNP SENV SF FR
SUBJECT: FRANCE AGGRESSIVELY PROMOTES NUCLEAR ENERGY TIES
WITH SOUTH AFRICA WHILE WESTINGHOUSE EXPANDS ITS OWN EFFORTS

REF: A. PRETORIA 00500

B. PRETORIA 00373
C. PRETORIA 00317

1. (SBU) This is an action request (see paragrah 7).

2. (SBU) Summary. France and South Africa seek greater
cooperation around energy issues including increased
electricity generation from nuclear power. The two countries
are expected to sign a cooperative agreement on the peaceful
use of nuclear energy in the near future. The French are
aggressively pursuing an opportunity to construct South
Africa's next nuclear reactor. A SAG vendor selection for
the next nuclear reactor is expected in March 2008.
Westinghouse will compete with the French for the bid, is
gearing up its local marketing efforts and seeks a decision
from the U.S. Department of Commerce on its request for
advocacy. End Summary.

-------------------------------
The French (Nuclear) Connection
-------------------------------

3. (SBU) Greater cooperation between France and South Africa
around energy issues, including increased electricity
generation from nuclear power, was announced at a
French-South Africa Energy Conference held in Cape Town by
South Africa Department of Minerals and Energy (DME) Minister
Buyelwa Sonjica and French Minister of Industry Francois Loos
on February 20. Both ministers cited in their opening
remarks the long-standing French/South African cooperation in
the nuclear sector - notably France's construction and
operation of South Africa's sole commercial nuclear reactor
near Koeberg in Western Cape Province. Sonjica stated that
South Africa expects to sign a cooperative agreement with
France around the peaceful use of nuclear energy. Sonjica
also used the conference as a platform to describe South
Africa's plans to enrich uranium (Septel). Loos said that
French parastatal nuclear energy company Areva hopes to win
the bid to build a second nuclear reactor in Koeberg and
wants to cooperate with South Africa as it develops its
Pebble Bed Modular Reactor (PBMR) program. (Note. South
Africa's Department of Public Enterprises (DPE) has invested
heavily in PBMR which uses 1980's German technology to build
low-output, helium-cooled reactors which can be built
remotely, transported and installed throughout the power
grid. End Note.) In early February, DME requested use of a
U.S. energy planning model and sought greater cooperation
with the U.S. around broad energy issues (Reftel A).

-----------------------------
The Russians Are (Not) Coming
-----------------------------

4. (SBU) South Africa parastatal power utility Eskom is
expected to announce the scope of plans for construction of
one or more additional conventional nuclear reactors at its
March 2007 board meeting. Eskom has chosen a pressurized
water reactor (PWR) design for construction of at least one
reactor which narrows the field of serious competition to
Westinghouse/Toshiba and Areva. (Note. GE/Haitachi produce
boiling water reactors (BWR) and are therefore out of
contention. End Note.) South Korea and Russia have also
expressed interest in bidding but are not being taken
seriously by industry and government insiders (Septel).
(Note. Westinghouse was purchased by Japan's Toshiba in late
2006. End Note.) A vendor selection decision by Eskom for
the next nuclear reactor is expected as early as March 2008.
Eskom is under pressure to build additional capacity as the
country suffers from rolling blackouts related to electricity
undersupply and aging infrastructure (Reftel B).

------------------------
Where Are The Americans?
------------------------

5. (SBU) Westinghouse officials met the Embassy's Economic
and Commercial Counselors and Nuclear Energy Officer on
February 27 to describe their planned response to Areva's

PRETORIA 00000747 002 OF 002


aggressive marketing effort to secure this contract.
Westinghouse's AP-1000 reactor design has technical
advantages over the Areva design including better passive
safety features, a smaller power output more suitable to
South Africa's limited power grid and the recent sale of four
AP-1000 reactors to China (Reftel C). Westinghouse is also a
minority investor (17%) in the PBMR program giving it
additional leverage in the reactor selection process.
Westinghouse can also demonstrate long-term commitment to
South Africa's nuclear program through its participation in
PBMR. French parastatal Areva has the advantage of French
government support and a network of partnerships with strong
political connections. Economic Counselor and Nuclear Energy
Officer met with Japanese Embassy Economic Officers February
27 to describe Westinghouse's plans. The Japanese officers
were familiar with the competition but said they had not
received any advocacy instructions from the Japanese
government/Toshiba yet.

6. (SBU) Meanwhile, the French have hosted a high-profile
conference on energy cooperation pronouncing plans to work
together in the nuclear sector. DME nuclear chief Tseliso
Maqubela summarized the situation when he told Nuclear Energy
Officer February 5 that Areva and the French are "all over"
DME and DPE, asking "Where is Westinghouse? - We need to see
more of them." According to Westinghouse Senior VP Regis
Matzie, Westinghouse is in the process of hiring additional
staff to open an office in South Africa, is purchasing a
South African nuclear engineering firm, is pushing for a
decision on its advocacy request with the U.S. Department of
Commerce, and will encourage Toshiba to make a similar
advocacy request for the Japanese government.

7. (SBU) Action Request. Based on the reaction of SAG
officials to the aggressive French campaign, the USG and
Westinghouse need to increase their efforts if Westinghouse
is to have a serious chance at winning this competition.
Embassy requests that the Department of Commerce respond to
Westinghouse's advocacy request before the end of March.
Embassy also requests that the Department of Energy respond
to DME's request for assistance with energy planning and
broader energy cooperation to both support Westinghouse and
to jump start stalled U.S.-South African nuclear cooperation
agreements.

8. (SBU) Comment. Local environmentalists are expected to
criticize the anticipated Eskom board decision to expand
nuclear generation capacity. However, conversion to nuclear
energy should have the favorable impact of lowering future
CO2 emissions from additional coal-based power plants. This
should help mute environmentalist criticism of additional
nuclear plant construction. End Comment.
BOST

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