Cablegate: France: Energy Sector Update

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 005010

SIPDIS

SENSITIVE

STATE FOR EUR/WE; OES; NP; EB/ESC, AND EB/CBA
USDOC FOR 4212/MAC/EUR/OEURA
DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80

E.O. 12958: N/A
TAGS: ENRG EPET EIND EINV PREL PGOV FR
SUBJECT: FRANCE: ENERGY SECTOR UPDATE

Sensitive but unclassified - Contains company proprietary
information.

Ref: Paris 3654

1. (U) This is the second in a series of occasional
updates on the French energy sector. Feedback is welcome
to help us make this product as useful as possible for
our Washington inter-agency audience.

Contents:
-- GDF share sale raises over four billion euros (para 2)
-- Total concerned about its concession in Sudan (para 3)
-- French nuclear powerhouse Areva bids to buy rival
Westinghouse (para 4)
-- France adopts new energy law (para 5)
-- New French Industry Minister takes over energy
portfolio (para 6)
-- France celebrates ITER site selection (para 7)

2. (U) GDF share sale raises over four billion euros:
Sixty years after the nationalization of the French
electricity and gas industries, the government has turned
a historical page, selling shares in gas utility Gaz de
France (GDF) for the first time (see Paris 4999). The
GOF will keep a 79% stake in the partially privatized
company. The government will use the 2.5 billion euros
in expected proceeds to reduce public debt and to fund
"innovative industries." GDF also sold new shares and
plans to use its two billion euros in new capital to
expand and to prepare for increasing national and
international competition. The success of the offering
has given impetus to the government's plan to move
forward with other privatizations, including electricity
utility Electricite de France (EDF) later this year.

3. (SBU) Total concerned about its concession in Sudan:
In June, Total company executives told us that they were
very concerned about the "White Nile" challenge to their
"Bloc B" concession in southern Sudan, which was
attributed to Marathon Oil in joint venture with Total.
White Nile is a UK-based company established recently and
owned primarily by a celebrity British cricket player,
who apparently cut a deal with the SPLM-SPLA rebel
leaders, even though the Sudanese Government had already
granted a concession for the area to Marathon/Total.
Total is concerned that, as the peace process proceeds,
the joint government/rebel commission deciding which oil
concessions are valid will be pressured to validate some
rebel-negotiated deals, such as this one. They see a
real potential vulnerability of loosing their investment,
which has been effectively frozen for over 20 years.

4. (SBU) French nuclear powerhouse Areva bids to buy
rival Westinghouse: Recent reports in French daily Le
Figaro and BBC News say that French nuclear conglomerate
Areva is bidding to buy U.S. competitor Westinghouse from
its current owner, state-owned British firm BNFL. Areva
reportedly hopes that its purchase of Westinghouse could
give greater access to the large American market, as the
U.S. government supports the construction of new nuclear
reactors to address growing U.S. energy demand. Another
factor in the decision to bid may have been
Westinghouse's success and Areva's failure to win USG
advocacy for potential nuclear reactor sales in China.
However, Areva faces stiff competition in what is quickly
becoming a bidding war for Westinghouse. Earlier,
Mitsubishi made a 1.8 billion dollar bid to purchase
Westinghouse. General Electric, the Shaw Group, and the
Cerberus investment fund have also reportedly made
offers. According to BNFL, several bidders have made
offers, which they will evaluate over the next six
months.

5. (U) France adopts new energy law: After surviving a
challenge in the French Constitutional Court, a new
energy law was formally adopted on July 13. The key
provisions of the new law will:
- promote energy diversity by increasing the percentage
of renewable energy in electric production from 13 to 21%
by 2010; increasing by 50% the quantity of heat produced
by renewable energies (biomass, wood, solar, geothermal)
and increasing from 1 to 5.75% by 2010 the proportion of
biofuels in gasoline and diesel.
- promote energy conservation by creating energy
certificates which require large energy users to conserve
energy either directly, indirectly, or by acquiring
"white certificates," which can be traded through a
national register.
- keep "nuclear option" open by breaking ground on a
demonstration nuclear reactor "of the most recent
design", i.e. the European water pressurized reactor
(EPR), by 2007 and completing construction by 2012.
- strengthen research for new energy technologies (carbon
sequestration, fuel cells, solar energy, etc.).
6. (U) New French Industry Minister takes over energy
portfolio: Following the GOF reshuffle on June 2,
Francois Loos, 51, stays on as Junior Minister ("Ministre
Delegue") in the French Ministry Economy and Finance, but
he switches portfolios from Foreign Trade to Industry.
The Industry Ministry is responsible, inter alia, for all
energy issues. Loos was previously Junior Minister for
Higher Learning and Research. Loos' background is not
that of a typical French politician. A graduate of
France's prestigious Polytechnic School, and an engineer,
he also holds a degree in Mathematics. Unlike many of
his colleagues, he has a strong private sector
background, which includes Secretary General of Research
for French pharmaceutical giant Rhone-Poulenc, and CEO of
Lohr SA Group, a manufacturer of industrial trucks and
specialized vehicles.

7. (SBU) France celebrates ITER site selection: After
three years of tension and negotiations, the six
international partners have decided to build a
International Thermonuclear Experimental Reactor (ITER)
in Cadarache, France (see also Marseille 0063). ITER is
a definite positive 'deliverable' the French government
can point to in an otherwise dismal year, e.g., the
French 'Non!' to the EU Constitution and the IOC's 'Non'
to France as the host country for the 2012 Olympic games,
the country's continued flat economic performance. In
the south of France, ITER is undoubtedly being seen as a
triumph that will assure jobs for years. A specialist in
technology and research matters, French Parliamentarian
Claude Birraux thinks that ITER is a very important
project, as well as a very long-term one, and said he is
hopeful that it will prove a success on different levels.
He thinks ITER could serve as a model for future
international research collaboration on Generation IV and
high-level nuclear waste, for example. Such a model will
be required to deal with the intellectual property
considerations of advanced research in these areas.

Stapleton

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