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

UNCLAS SECTION 01 OF 03 PARIS 003654 
 
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. 
 
¶1. (U) This is the first 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: 
-- EDF brokers deal to control Italian power company 
(para 2) 
-- Industry Minister pushes EDF to sell electricity 
transmission company (para 3) 
-- SEC inquiry about Iran raised at Total shareholder 
meeting (para 4) 
-- U.S. Energy Secretary meets French counterpart (para 
5) 
-- Former GDF directors create Altergaz (para 6) 
-- Total negotiates end to strikes at French oil 
refineries (para 7) 
-- Areva hopes to build nuclear reactors in the U.S. 
(para 8) 
-- U.S. Energy Secretary discusses nuclear energy issues 
with Areva CEO (para 9) 
-- Areva lobbies (again) for U.S. support in China (para 
10) 
 
¶2. (U) EDF brokers deal to control Italian power company: 
The state-owned French power company Electricite de 
France (EDF) will pay seven billion euros to resolve 
investment disputes in Italy in a deal that would give 
EDF a 50% stake in Edison, Italy's second-largest 
electricity producer.  Although the deal values Edison at 
only 7.5 billion euros, EDF had faced debt and equity 
obligations of up to 13 billion euros as a result of a 
complex series of put and call options.  Assuming the 
deal is approved by European competition authorities, it 
would help clarify EDF's murky balance sheet and thus 
help pave the way for the planned privatization of up to 
30% of EDF later this year by resolving a four-year 
impasse over EDF's liabilities in Italy.  Uncertainties 
remain, including the abolition of certain Italian 
limitations on foreign shareholder voting rights.  If 
these are not lifted by May 27, EDF may pull out of the 
deal. 
 
¶3. (U) Industry Minister pushes EDF to sell electricity 
transmission company:  According to French business daily 
La Tribune, GOF Industry Minister Patrick Devedjian said 
that he would like to see 50% of the shares in RTE 
(Reseau de Transport d'Electricite) sold to the public 
sector bank CDC (Caisse des Depots et Consignations).  In 
effect, this would not be a privatization, but rather a 
transfer from one GOF institution to another.  However, 
it would satisfy an important requirement of the European 
Commission and the new French energy sector reform law 
(04 Paris 6157) that EDF fully separate electricity 
transmission from production, so that independent power 
producers have unfettered access to the national 
transmission grid.  Currently, EDF still owns 100% of 
RTE, although French energy regulator CRE (Commission de 
Regulation de l'Energie) requires a certain level of 
bureaucratic separation between the two entities. 
Estimates put the total value of RTE at approximately 
four billion euros.  The two billion euros that EDF would 
get from the sale could help to finance EDF's takeover of 
Edison, which otherwise might throw EDF deeper into debt. 
However, Devedjian denied a link between EDF's RTE stock 
sale and Edison purchase. 
 
¶4. (U) SEC inquiry about Iran raised at Total shareholder 
meeting:  Total Chairman Thierry Desmarest said that the 
French oil company will respond to an inquiry from the 
U.S. Securities and Exchange Commission for details about 
its operations in Iran "as long as this doesn't raise 
problems with the limits of sovereignty."  Desmarest's 
remarks are likely a sign that Total may set limits to 
what it will disclose about its business in Iran, because 
Total deems that a U.S. embargo on Iran doesn't extend to 
French corporations. "We aim to have a fruitful 
cooperation with the SEC," Desmarest said at an annual 
shareholders' meeting on May 17.  Total first disclosed 
it had received a request from the SEC for information on 
its operations in Iran in a legal filing posted on the 
regulator's Web site in mid-April.   According to Dow 
Jones Newswires, the SEC wants to know whether Total and 
other oil companies doing business in Iran have paid 
"commissions" to intermediaries to secure contracts in 
the country. 
 
¶5. (SBU) U.S. Energy Secretary meets French counterpart: 
On May 3, Energy Secretary Bodman met with GOF Industry 
Ministry Patrick Devedjian on the margins of the OECD/IEA 
Ministerial in Paris.  The brief encounter served as a 
good introductory meeting between the two officials. 
Devedjian said that the nuclear energy policies of our 
two countries were "very much in harmony" and he was 
pleased that the reprocessing of U.S. weapons-grade 
plutonium in France (the "Eurofab" project) had gone 
smoothly.  It wasn't often, he noted, that France is in a 
position to offer technological lessons to the United 
States.  Bodman thanked Devedjian for France's 
hospitality as host of the OECD and IEA Ministerial 
meetings.  Noting the lack of focus or measurable goals, 
Bodman expressed interest in goal-setting for future IEA 
Ministerials. 
 
¶6. (U) Former GDF directors create Altergaz:  Three 
former directors of natural gas group Gaz de France (GDF) 
have created Altergaz, the first independent natural gas 
provider on the French market.  The new company plans to 
complete a private share placement for 15 million euros 
at the end of May, and will then carry out a stock market 
listing.  Altergaz has already signed a contract with 
Italian energy group Eni for supplies of natural gas from 
the North Sea.  The company is targeting the French 
business market, which is worth 4.5 billion euros and 
remains dominated by GDF.  Altergaz will begin its first 
deliveries of gas on October 1, 2005. 
 
¶7. (U) Total negotiates end to strikes at French oil 
refineries:  Total, the French oil group, bowed to 
political pressure and ended a week-long strike at its 
domestic refineries, which led to some local gas 
shortages.  The company said staff in its six French 
refineries returned to work on May 23 after it agreed to 
give them an extra day off to make up for working on 
Pentecost, or Whit Monday, which was scrapped as a 
official public holiday by the GOF this year.  Pressure 
reportedly came from French Prime Minister Jean-Pierre 
Raffarin, who was keen to avoid embarrassing gas 
shortages only a few days before the May 29 referendum on 
the European constitution. 
 
¶8. (U) Areva hopes to build nuclear reactors in the U.S.: 
On May 19, French daily La Croix reported that French 
nuclear power company Areva (ref 04 Paris 8615), through 
its potential U.S. customer Constellation Energy, had 
submitted a license application for the European 
Pressurized Reactor (EPR) to the U.S. Nuclear Regulatory 
Commission.  In an article entitled "Areva eyes the 
American market," the paper noted that Areva hopes to win 
contracts to build the EPR in the U.S.  However, Areva 
and the French press seem to be engaging in wishful 
thinking.  Westinghouse already has a license for its 
AP1000 (the EPR's closest competitor) and the NRC review 
for an EPR license is expected to take up to two years. 
So, for the time being, Westinghouse has a distinct 
advantage in the U.S. market.  In the meantime, Areva 
will continue to grow its already lucrative business in 
the U.S., repairing and maintaining the aging fleet of 
existing U.S. nuclear reactors, rather than selling new 
nuclear reactors.  In the near-term, the Chinese market 
is where the Areva EPR versus Westinghouse AP1000 
competition battle will be fought.  The Chinese plan to 
announce their choice this autumn for an eight billion 
dollar contract to build four nuclear reactors -- a 
contract that will likely lead to more orders in China's 
rapidly growing energy market. 
 
¶9. (SBU) U.S. Energy Secretary discusses nuclear energy 
issues with Areva CEO:  Secretary Bodman also met with 
Areva CEO Anne Lauvergeon during his May 3 visit to Paris 
for the IEA Ministerial.  It was the first time the two 
had met and served as an opportunity for the Secretary to 
hear European industry views on U.S. energy policy. 
(Details about Areva, a very large and vertically- 
integrated nuclear energy services company, can be found 
in 04 Paris 8615 and 05 Paris 2764.)  Lauvergeon 
emphasized the importance of U.S. policy and its impact 
on nuclear power in Europe.  She expressed her pleasure 
with President Bush's latest speech on energy policy 
because it emphasized the importance of nuclear energy as 
part of the energy mix.  Secretary Bodman said that the 
President feels very strongly about it because it's the 
right thing for the country.  Lauvergeon said that the 
2010 program is significant because it helps with siting 
and licensing a new plant.   However, industry is still 
looking for insurance on the back-end of the fuel cycle 
to ensure the production of nuclear energy is 
economically desirable.  Secretary Bodman explained that 
Yucca Mountain is a problem because the State of Nevada 
is doing everything possible to prohibit its construction 
and a recent court case has caused delays in the 
schedule.  He added that by the time the Yucca Mountain 
site is ready to take in nuclear waste, it would almost 
immediately be filled to capacity due to the backlog. 
Lauvergeon offered her company's assistance to DOE in the 
treatment of spent fuel.  Secretary Bodman advised her to 
work with Deputy Secretary of Energy Clay Sell who is in 
charge of developing a more thorough strategy of dealing 
with the nuclear waste issue. 
 
¶10. (SBU) Areva lobbies (again) for U.S. support in 
China:  Echoing our earlier meetings with Areva officials 
(ref Paris 2764), Areva CEO Lauvergeon recently told U.S. 
Energy Secretary Bodman that Areva now has 7,000 
employees in the U.S. and that if they are successful in 
their bid to build reactors in China, there will be 
direct benefits to the United States in the form of jobs 
and income.  Secretary Bodman pressed her on this and she 
said that if Areva were successful the U.S. would receive 
about 200 to 300 million dollars out of a two billion 
dollar contract to AREVA.  Lauvergeon also said that the 
reactor design is a good one for the U.S.  She asserted 
that, in terms of employment, Areva employs more people 
in the U.S. than Westinghouse. 
 
Wolff