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

111014Z Jan 06

UNCLAS SECTION 01 OF 02 PARIS 000169 
 
SIPDIS 
 
STATE FOR EUR/WE; OES; STAS; ISN; 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: 04 Paris 7704 and previous 
 
¶1.  This is the fifth 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: 
-- France to develop fourth-generation nuclear reactor (See 
Para 2); 
-- Peugeot Citroen to launch hybrid diesel models by 2010 
(Para 3); 
-- Areva is rebranding Framatome and Cogema (Para 4); 
-- China expects Areva to improve its offer for a nuclear 
reactor deal (Para 5); 
-- Areva T&D confirms its position as a leading electrical 
infrastructure supplier in the in Middle East (Para 6); 
-- EDF foresees net profit rising 10 percent a year(Para 7); 
-- EDF share sale hits snags, gives Enel French foothold 
(Para 8); 
-- Brussels opens state aid probe into French oil research 
group (Para 9). 
 
¶2.  France to develop fourth-generation nuclear reactor:  In 
a New Year's message to French business leaders and unions, 
Chirac announced his decision to immediately launch work by 
the French Atomic Energy Commission (CEA) on a prototype 
fourth-generation reactor in order that it may go into 
service in 2020.  This new initiative is designed to meet 
France's medium-term energy needs.  At the same time, France 
will remain a key partner in ITER, the long-term research 
program for an experimental fusion reactor based in southern 
France to harness the energy of the sun, as well as in 
developing a third-generation EPR reactor, which will begin 
replacing France's aging 58 reactors starting in 2012. 
Underscoring the need to adapt to climate change, Chirac 
also said that oil would be gradually phased out in favor of 
alternative fuels for the country's public transport 
networks.  As a result, French rail operator SNCF and the 
Paris metro and bus company RATP should not use a drop of 
oil in 20 years' time.  He also called for the use of 
biofuels to be multiplied by five within two years. 
Finally, he pledged to improve transparency through the 
creation of an independent nuclear safety agency and the 
adoption by parliament this year of a new law on the storage 
of radioactive waste. 
 
¶3.  Peugeot Citroen to launch hybrid diesel models by 2010: 
French automaker Peugeot Citroen will unveil later this 
month two demonstrator models for diesel-based hybrid cars, 
which are expected to be on the market by 2010.  The Peugeot 
307 and Citroen C4 demonstration cars are fitted with a 
hybrid diesel system, which cuts emissions and reduces fuel 
consumption. The new models would be a way for the country 
to cut its dependence on hydrocarbons in a time of rising 
oil prices, to move toward its goals to reduce the emission 
of greenhouse gases, and in so doing to help France meet its 
Kyoto commitments. 
 
¶4.  Areva is rebranding Framatome and Cogema:  French 
nuclear engineering group Areva recently announced plans to 
drop the old-established Framatome and Cogema names in order 
to "harmonise the communication of its commercial brands." 
As a result, Framatome, the subsidiary which constructs 
nuclear power reactors, will be rebaptised Areva NP (for 
Nuclear Power), while Cogema, the nuclear fuel division, 
will become Areva NC (Nuclear Cycle).  Areva, formed in 2001 
from the merger of CEA Industrie, Cogema and Framatome, is 
93 percent state-owned, with only 4 percent currently listed 
via investment units. The government last year scrapped 
plans for an IPO and said no shares will be sold before 
¶2007. 
 
¶5.  China expects Areva to improve its offer for a nuclear 
reactor deal:  During a December 2005 visit to France, 
Chinese Prime Minister Wen Jiabao told the French daily "Le 
Figaro" that China was not satisfied with the foreign offers 
generated by its huge nuclear power program, which he 
described as high in price and low in technology transfers. 
This warning corroborates the announcement by the Chinese 
Government of a postponement in awarding the nuclear 
contracts and a probable delay in starting the construction 
of the first four reactors.  French observers described the 
event as "a cold shower" for the French group Areva that 
furnished China its first civil reactors in the 1980's. 
Besides the price, companies have to improve their bids in 
at least one of two areas, "the engineering or the security 
of the power plants", according to Chinese authorities. 
Areva has since then tabled a new proposal, which has not 
been made public.  Company officials are well-aware that the 
stakes are enormous.  According to a French manufacturer, 
China "represents 20 percent of the world population and 50 
percent of future electricity needs." 
¶6.  Areva T&D confirms its position as a leading electrical 
infrastructure supplier in the in Middle East:  With the 
signing of its third major contract in the Middle East in a 
few weeks worth a total of 334 million euros, Areva 
Transmission and Distribution (Areva T&D) reinforces its 
position as a leading electrical infrastructure supplier in 
this high-growth region.  Areva T&D will participate in a 
multi-million euro grid interconnection project to link the 
networks of Gulf Cooperation Council members: Saudi Arabia, 
Bahrain, United Arab Emirates, Kuwait, Qatar and Oman. 
Areva T&D has also signed a 140 million euro agreement with 
national public utility Qatar General Electricity and Water 
Corporation (KAHRAMAA) for the expansion of the electricity 
transmission network in the Qatari capital. 
 
¶7.  EDF foresees net profit rising 10 percent a year:  The 
President of French electricity giant EDF, Pierre Gadonneix, 
said in December that he expected EDF to see bottom-line 
earnings rise by about 10.0 percent each year in the coming 
years.  Cost-cutting and efficiency-boosting measures, as 
well as a 26-billion-euro (31-billion-dollar) investment 
program over the next three years "will boost our operating 
profit by three to six percent and our after-tax profit by 
10 percent," Gadonneix told the Frankfurter Allgemeine 
Zeitung.  He further explained that EDF would "pull out of 
countries where there are no synergies with Europe" to 
finance its investment program.  This comes on top of the 
recent 6.25 billion euro capital increase, efficiency- 
boosting measures, cost-cutting via job cuts and an internal 
reorganization. 
 
¶8.  EDF share sale hits snags, gives Enel French foothold: 
Overall, the EDF capital opening did not go as smoothly as 
first hoped.  EDF had hoped to raise seven billion euros 
and, to make matters worse, there were reports of individual 
retail investors who were hoodwinked into buying shares by 
their banks.  Dozens of individuals reportedly complained to 
the French financial markets regulator, AMF.  French banks 
Credit Lyonnais and Societe General, which both advised the 
government on the sale, confirmed that they had a handful of 
complaints, but clients were reimbursed immediately. 
Meanwhile, demonstrating tangible evidence of some market 
opening, the Italian power company Enel has made a long- 
awaited breakthrough into the French electricity market, 
receiving 300 MW of power a year from EDF as of January 1 
for resale to French clients.  The EDF cooperation deal with 
Enel reportedly could be expanded to include Enel's 
participation in the nuclear power plant project in Normandy 
launched by the French government over a year ago. 
 
¶9.  Brussels opens state aid probe into French oil research 
group:  In late-December, the European Commission opened a 
probe into French state aid to the French Petroleum 
Institute (IFP), a non-profit research outfit.  The 
commission in particular voiced concerns that IFP and a 
subsidiary that sells its research findings were a "single 
player" even though the unit was in competition with private 
companies.  IFP, which focuses on research into hydrocarbons 
and refining technology, received state aid of 200 million 
euros (236 millions dollars) in 2003 and 163 million euros 
in 2004, the commission said. 
 
Stapleton