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Cablegate: Framatome/Partner in Nuclear Power

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PARIS 002764

SIPDIS

STATE FOR EB/CBA, EB/ESC, AND NP/NE
COMMERCE FOR ADVOCACY CENTER

E.O. 12958: N/A
TAGS: EIND BEXP TRGY EIND FR CH ENGR
SUBJECT: FRAMATOME/PARTNER IN NUCLEAR POWER

REF A) 04 Paris 8615
B) 04 Paris 7832

This message contains proprietary information and is not
for internet distribution.

1. Please direct this message to the Commerce Department
Advocacy Center.

2. Summary: On April 18, Embassy Science Officers
visited Framatome headquarters, a subsidiary of GOF
majority-owned Areva, which provides nuclear power
reactors, fuel, and support services not only in France,
but around the world. In fact, Framatome executives
claim that Areva is the largest nuclear supplier company
in the U.S., with substantial investments in
manufacturing and service facilities, as well as human
capital. Framatome executives informed Science Officers
that they had met with the Commerce Advocacy Center on
March 23 in connection with possible advocacy for Areva's
recent bid for building four nuclear power plant islands
in China. We understand that Areva has formally
submitted advocacy paperwork to Commerce for
consideration and representatives from Areva plan to re-
visit the Advocacy Center again on May 6 to discuss the
request. End Summary.

Who are Areva and Framatome?
----------------------------

3. Areva was formed from pre-existing mostly nuclear-
related entities in 2001, and its subsidiaries -- Cogema,
Framatome, Technicatome, FCI, and Areva T&D -- provide
the full range of nuclear power services including
mining, fuel production, reactor construction, operating
services, instrumentation and controls, spent fuel
disposition, and power transmission and distribution.
Areva is 96 percent-owned by the GOF, with private
investors holding the remainder. Further, deeper partial
privatization of Areva is expected before the end of
2006. (See ref A and para 9, below.)

4. Framatome ANP is a 66/34 joint venture of Areva and
Siemens that manufactures reactors and control systems,
produces nuclear fuel, and provides maintenance and
repair services. It has a German and a U.S. subsidiary,
the latter of which was initiated with the purchase of
Babcock and Wilcox. Framatome-ANP has a slight edge over
BNFL (owner of Westinghouse) for the most installed
nuclear facilities (98 reactors) in the world, according
to Framatome figures. Ref A is a detailed report
regarding Areva prepared prior to Areva's submission of
the China bid.

What are current Framatome projects?
------------------------------------

5. Framatome recently won the bid to construct a first
of its kind EPR (Evolutionary or European Pressure
Reactor) in Olkiluoto, Finland. The reactor's
unprecedented 1600 megawatt designed output is to yield a
total cost per kilowatt hour of 2.5 euro cents (based on
contemporary costs for Uranium), allegedly the deciding
factor in a contest with proposals from Westinghouse and
Minatom (Russian manufacturer) with 1200 and 1000 MW
respective outputs. The EPR is based on improvements to
Framatome's N4 and Siemens Konvoi reactors, respectively.
It includes safety and security enhancements such as a
"core catcher" design to isolate and mitigate potential
core meltdown and a thick, double concrete wall designed
to withstand the impact of a 747-sized aircraft.
Framatome will be building a similar new EPR at the
French Flamanville site (ref B). EDF partnered in the
development of the EPR's steam supply system and will
serve as its own architect for the Flamanville project.
Consequently, only the turbine and other sub-contracts of
will be open to competitive bids.


Advocacy Being Requested.
-------------------------

6. Framatome executives highlighted that the company's
U.S. subsidiary, with acknowledged French ownership,
employs more than 3,000 Americans. Areva and Framatome
executives visited Commerce's Advocacy Center in
Washington on March 23 to discuss the possibility of U.S.
advocacy for Areva/Framatome's bid for four nuclear
islands in Yangjiang and Sanmen, China. U.S. Eximbank
has provided an expression of financing for
Westinghouse's bid for the same project. While not
providing details, Framatome executives claimed to
Embassy Officers that the AREVA China bid will have
significant U.S. content and should be a plus for the
U.S. in the event AREVA wins the bid.

7. Framatome executives said that it planned to use
components from the U.S. subsidiary in support of their
China bid. They alleged some of Westinghouse's
components would be manufactured in Asia if Westinghouse
wins the competition. They also claimed that
Westinghouse's partner in the bid for creating the
`conventional island,' or non-nuclear portion of the
power generation package, Mitsubishi, has been promoting
the bid in China as a Japanese -- and not U.S. -- bid.
However, in the current anti-Japanese environment,
Framatome representatives see their competitors backing
off emphasis of Japanese content.

8. We understand that Framatome's U.S. subsidiary has
revised and formally submitted a petition for support to
the USDOC advocacy center and has a meeting scheduled
with Commerce officials on May 6.

Areva up for partial sale?
--------------------------

9. In one of his first acts as France's new Finance
Minister, Thierry Breton said the earliest the
anticipated partial Areva privatization would take place
is 2006, rather than in 2005 as previously announced. He
has chosen to first focus on privatizing the state gas
and electricity monopolies of GDF and EDF. The eventual
Areva offering will raise the current level of traded
shares to 35 or 40 percent of valuation, while
maintaining control in the hands of the GOF.

10. COMMENT: The Embassy maintains excellent relations
with the Areva group of companies, one of which is a
contractor to the U.S. Department of Energy. Should the
Advocacy Center require further details which would
assist in any Areva or Framatome advocacy decision, the
Embassy stands ready to assist. END COMMENT

WOLFF

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