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Cablegate: Westinghouse Still in the Game After Sarkozy Splash

VZCZCXYZ4813
RR RUEHWEB

DE RUEHSA #0440/01 0641045
ZNR UUUUU ZZH
R 041045Z MAR 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3669
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0757
RUEHLO/AMEMBASSY LONDON 1447
RUEHMO/AMEMBASSY MOSCOW 0757
RUEHNE/AMEMBASSY NEW DELHI 0473
RUEHFR/AMEMBASSY PARIS 1299
RUEHUL/AMEMBASSY SEOUL 0235
RUEHKO/AMEMBASSY TOKYO 0514
RUCPDC/DEPT OF COMMERCE WASHDC
RUEHUNV/USMISSION UNVIE VIENNA 0270
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS PRETORIA 000440

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/S, EEB/ESC, ISN
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT

E.O. 12958: N/A
TAGS: ENRG TRGY BEXP PREL KNNP SF FR
SUBJECT: WESTINGHOUSE STILL IN THE GAME AFTER SARKOZY SPLASH

REF: A. PRETORIA 315
B. 07 PRETORIA 4172
C. 07 PRETORIA 3839
D. 07 PRETORIA 3078

1. (SBU) SUMMARY: French President Nicholas Sarkozy led a
senior commercial delegation on his state visit to South
Africa February 28-29. He succeeded in catalyzing a media
campaign of announcements of French cooperation and deals
focused on the troubled energy sector, thereby seeking to
advance Areva's bid for new nuclear build, to the
disadvantage of competing bidder Westinghouse. Westinghouse
is still "in the game" and optimistic, but is eager for
increased USG advocacy support - in addition to the DOC
advocacy plan already underway. Septel will report on the
political aspects of the French state visit. End Summary.

---------------------
"Eskom's French Kiss"
---------------------

2. (SBU) French President Nicholas Sarkozy was accompanied
by 40 senior business executives, including Areva, EDF, and
Alstom, on his February 28-29 state visit to South Africa.
His visit was crafted to advance economic and commercial
bilateral ties, particularly in energy. "We will fight to
get the overall power plant market, coal and nuclear,"
Sarkozy told a meeting of representatives of South African
and French Companies in Cape Town on February 29.
Westinghouse and Areva are competing for nuclear power plant
supply contracts in South Africa in a first tranche of 3,500
MW and in a second tranche of a fleet of up to 20,000 MW
through 2025, potentially worth up to $133 billion (Refs C
and D). The recent power supply crisis has created a greater
sense of urgency, although new nuclear power plants will come
on line over a long time frame (Ref A). Sarkozy and the
French delegation were able to orchestrate the following
announcements over the course of the visit, intended to
advance the Areva bid:

- - State electricity supplier Eskom announced a contract
with Alstom to provide six turbines at the new Bravo
coal-fired power plant in the northern province of Mpumalanga
(worth $2 billion). Alstom is already furnishing six
turbines for the new Medupi coal-fired power plant in
Limpopo, also in the north. Alstom announced intent to
source at least 50 percent of the combined contracts locally.
(Note: Hitachi Power Africa, which won the lucrative boiler
contracts for the Medupi and Bravo plants, has as a 25
percent shareholder empowerment firm Chancellor House, which
was exposed as a front for the ANC. End Note.)

- - Sarkozy offered to immediately send a team of engineers
to help Eskom overcome the power supply crisis and its
technical skills shortage.

- - Sarkozy announced his intent to establish an investment
fund of Euro 250 million to assist French companies to invest
in the South African renewable energy and high technology
sectors. He urged South African businesses to change their
"Anglo-Saxon mind-set" and look upon France as a reliable
investment and trading partner.

- - Areva signed a number of nuclear skills development
agreements with South Africa's Nuclear Energy Corporation
(NECSA). Areva said that a joint venture between Areva and
Q(NECSA). Areva said that a joint venture between Areva and
NECSA would increase training in technology and energy of
disadvantaged South Africans. The companies also agreed to
extend an existing program to train nuclear engineers in
France.

- - Eskom and the French development agency AFD signed a
financing framework agreement as a precursor to the
conclusion of a Euro 100 million, 20-year loan for the
financing of Eskom's new wind farm project in the Western
Cape.

- - Areva Transmission & Distribution Automation announced
intent to work with its partner Alstom South Africa on
smart-metering and smart-grids to help the SAG implement its
National Response Plan to curb energy usage by residential
customers. Alstom SA recently completed Eskom's new National
Control Center.

- - Areva and Rio Tinto Alcan signed a contract to build a
conversion sub-station to supply direct current for Rio
Tinto's new aluminum smelter in Port Elizabeth (worth Euro 80
million). The status of this project has been uncertain with
recent power supply woes.

- - Areva announced its intent to partner with various
entities in South Africa to build the EPR (new nuclear power
plants) fleet and develop different aspects of the nuclear
industry, from manufacturing and uranium beneficiation.
Areva built the twin reactors for South Africa's Koeberg
nuclear power station near Cape Town, and has sought to
convey the perception that this gives it a head start for the
new tender.

------------------------------
Westinghouse Still in the Game
------------------------------

3. (SBU) Westinghouse Regional Vice President Rita Bowser
told Energy Officer on March 3 "we are still in the game and
we are holding are own," and they aimed to fight hard and
counter the French messages. She observed that Sarkozy and
his delegation did what was expected and accomplished what
they have done elsewhere, noting that many of the announced
agreements were recycled old ones or announcements of intent.
Bowser said that Westinghouse was in negotiations with Eskom
during the visit and their interlocutors said they had
received no instructions to change the process. She stated
Eskom would submit its technical recommendation to the SAG in
June, after which there would be some sort of political
vetting before the final decision.

4. (SBU) Bowser outlined a number of actions Westinghouse
had taken or intended to take to counter the French splash.
Westinghouse briefed Commerce Assistant Secretary Israel
Hernandez in advance of his March 10 visit to South Africa.
Westinghouse has asked the Secretaries of Energy and Commerce
to write letters in their behalf. Westinghouse just signed a
technology sharing terms of reference agreement with NECSA.
She said Westinghouse was close to signing a new shareholders
agreement for the Pebble Bed Modular Reactor (PBMR), where
Westinghouse holds a 15 percent share. The signing could
offer another hook for a public announcement. Bowser hoped
that the USG could seek opportunities to highlight messages
such as the U.S. and Japan representing the number one and
two export markets for South Africa. She expressed the
desire that the USG would facilitate some opportunities for
"human interaction" advocacy on Westinghouse's behalf.

-------------------------------------
COMMENT - What is the "U.S. Package"?
-------------------------------------

5. (SBU) It will be a challenge to overcome the high-level
and timely French advocacy on behalf of the "French package",
which will have made a strong impression on senior SAG
officials who will have the last voice in the political
vetting of the new nuclear build tender. Department of
Qvetting of the new nuclear build tender. Department of
Minerals and Energy (DME) Chief Director: Nuclear Tseliso
Maqubela asked Economic Counselor in a meeting last year:
"what will be the U.S. package?" refering to the new nuclear
build tender. Westinghouse is a strong contender for the
tender on merit, particularly with respect to its proposals
for localization, technology transfer, and training, for
which it can point to its track record in Korea and
elsewhere. For example, with respect to ASGISA (Accelerated
Shared Growth Identification for South Africa) criteria,
Westinghouse competes strongly, as it has quantified up to
2500 new jobs from its localization scheme. Embassy
organized a dinner in February for Westinghouse Senior Vice
President Dan Lipman to present Westinghouse's localization
proposal to SAG officials from four relevant Departments. At
the dinner, Department of Public Enterprises Director:
Special Projects Edwin Ritchken told Economic Counselor the
tender decision would be based on "the fuel cycle", which
could broadly include fuel enrichment and processing and
spent fuel reprocessing. Although the new nuclear build
tender does not specifically include these items, the SAG
draft energy policy from last year calls for potential
beneficiation and self-sustainment in these areas, and the
"French package" may extend the "fuel cycle" at both ends to
include these. The Westinghouse proposal includes broad and
sophisticated fuel technology and manufacturing, but not/not
enrichment and fuel reprocessing.

6. (SBU) The USG could consider building on the DOC advocacy
campaign underway with additional contacts. For example,
Minister of Minerals and Energy Buyelwa Sonjica will be
leading the SAG delegation at the Washington International
Renewable Energy Conference (WIREC) March 4-6. State, DOC,
and DOE officials could take advantage of this opportunity to
express USG support for Westinghouse. Post is also working
with DOC, SAG, and Eskom to organize an ASME (American
Society of Mechanical Engineers) standards conference to
encourage South African nuclear suppliers to adopt ASME
standards as a means to participate in Westinghouse's global
supply chain.
BOST

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