US embassy cable - 05PARIS2764

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