US embassy cable - 05PARIS6660

UNCLAS SECTION 01 OF 02 PARIS 006660 
 
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 
 
Ref: Paris 5010 
 
Paris 3654 
 
1. (U) This is the third 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 inter-agency USG audience. 
 
Contents: 
-- Labor unrest threatens production at French refineries 
(para 2) 
-- GOF response to high fuel prices favors farmers (para 
3) 
-- Finance Minister promotes nuclear power at IMF meeting 
(para 4) 
-- Areva and Constellation Energy announce nuclear 
partnership (para 5) 
-- EDF prepares for initial public offering (para 6) 
 
2. (U) Labor unrest threatens production at French 
refineries:  On September 27, Total said that its 
Gonfreville refinery, France's largest, continued to 
produce at reduced capacity as a strike over pay extended 
into its third day.  Other reports said that striking 
workers had effectively closed the refinery.  Based in 
France's northwest region of Normandy, Gonfreville is one 
of six operated by Total in France, but most notably is 
France's largest refinery, with a capacity of 343,000 
barrels per day or about 15 percent of France's total 
refining capacity.  In southern France, French shipping 
workers protesting the planned privatization of ferry 
company SNCM temporarily blockaded the Lavera-Fos port 
near Marseille that feeds refineries with a total 570,000 
bpd of capacity, although as of September 28 oil firms 
said operations have not yet been affected. 
 
3. (SBU) GOF response to high fuel prices favors farmers: 
Fearing a repeat of 2000 protests by farmers and 
truckers, the French Government responded to the post- 
Katrina spike in fuel prices by providing fuel tax 
rebates for farmers.  At an agriculture fair on September 
13, Prime Minister Dominique de Villepin unveiled a 30 
million euro aid package for farmers hit by the recent 
surge in fuel prices.  Most of the aid comes in the form 
of fuel tax rebates of 20-50% for heating oil, natural 
gas, and heavy fuel oil.  Taxes account for nearly 75% if 
the retail pump price of gasoline and diesel in France. 
De Villepin also announced that he would accelerate plans 
to promote the use of biofuels.  The GOF will soon call 
for bids to build a 300 megawatt biofuel electricity 
plant and set a new goal for biofuels to satisfy 5.75 
percent of total French energy consumption by 2008, two 
years ahead of the target set by the European Commission. 
The GOF also raised the tax credit for "clean vehicles" 
(most of which run on natural gas or electricity) from 
1,500 to 2,000 euros. 
 
4. (SBU) Finance Minister promotes nuclear power at IMF 
meeting:  French Finance Minister Thierry Breton urged 
the U.S. and other leading oil-consuming nations to 
invest in nuclear and other alternative energies, and 
criticized countries that subsidize oil consumption or 
don't tax it enough.  "We must reduce oil subsidies where 
they exist, encourage through taxation a development 
model which is more respectful of fossil fuel resources," 
Breton said in a September 24 speech before the 
International Monetary Fund in Washington.  "Developing 
alternative energies, nuclear energy in particular," is 
essential to prepare for "post-oil" times, he said. 
France has an important stake in the future of nuclear 
power, particularly since the GOF owns nuclear powerhouse 
Areva, the world's largest nuclear engineering and 
services company.  (For more on Areva, see also 04 Paris 
8615.) 
 
5. (SBU) Areva and Constellation Energy announce nuclear 
partnership:  French nuclear services giant Areva 
recently announced a strategic partnership with U.S. 
power company Constellation Energy to form a joint 
venture, called Unistar Nuclear, in an effort to gain a 
head start in the race to build the first nuclear power 
reactor in the U.S. in almost 30 years.  Unistar Nuclear 
will promote the European Pressurized Reactor (marketed 
in the U.S. as the Evolutionary Pressurized Reactor), 
which was jointly developed by Areva and Siemens.  As 
currently envisioned, Constellation Energy would operate 
the proposed fleet of new U.S. nuclear power plants and 
expects to hold the operating licenses.  Constellation 
Energy submitted a license application for the EPR to the 
Nuclear Regulatory in May 2004 and Areva claims to have 
dedicated over 200 engineers and $200 million to adapt 
the EPR technology to American requirements. 
 
6. (SBU) EDF prepares for initial public offering:  In 
anticipation of long-awaited partial privatization within 
the next several weeks, GOF auditors estimated the total 
value of Electricite de France (EDF) at 60 billion euros, 
which was at the low end of the anticipated range of 50 
to 100 billion euros.  GOF officials have also been 
meeting with banks to select which ones will manage what 
will likely be one of France's largest initial public 
offerings.  According to our contacts in the Industry 
Ministry, EDF hopes to earn up to nine billion euros 
through an offering of new shares, which would dilute the 
GOF stake to between 80 and 85 percent.  The additional 
capital raised could be used for new investments, such as 
plans to build a new nuclear reactor in Flamanville, 
Normandy, which is expected to cost three billion euros. 
However, the IPO will not occur before next week, when 
France's leading unions, which oppose any form of 
privatization fearing layoffs, have called for power cuts 
as part of a nationwide strike on October 4. 
 
Stapleton