VZCZCXYZ4813
RR RUEHWEB

DE RUEHSA #0440/01 0641045
ZNR UUUUU ZZH
R 041045Z MAR 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3669
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0757
RUEHLO/AMEMBASSY LONDON 1447
RUEHMO/AMEMBASSY MOSCOW 0757
RUEHNE/AMEMBASSY NEW DELHI 0473
RUEHFR/AMEMBASSY PARIS 1299
RUEHUL/AMEMBASSY SEOUL 0235
RUEHKO/AMEMBASSY TOKYO 0514
RUCPDC/DEPT OF COMMERCE WASHDC
RUEHUNV/USMISSION UNVIE VIENNA 0270
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS PRETORIA 000440 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR AF/S, EEB/ESC, ISN 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT 
 
E.O. 12958: N/A 
TAGS: ENRG TRGY BEXP PREL KNNP SF FR
SUBJECT: WESTINGHOUSE STILL IN THE GAME AFTER SARKOZY SPLASH 
 
REF: A. PRETORIA 315 
     ¶B. 07 PRETORIA 4172 
     ¶C. 07 PRETORIA 3839 
     ¶D. 07 PRETORIA 3078 
 
 ¶1.  (SBU) SUMMARY: French President Nicholas Sarkozy led a 
senior commercial delegation on his state visit to South 
Africa February 28-29.  He succeeded in catalyzing a media 
campaign of announcements of French cooperation and deals 
focused on the troubled energy sector, thereby seeking to 
advance Areva's bid for new nuclear build, to the 
disadvantage of competing bidder Westinghouse.  Westinghouse 
is still "in the game" and optimistic, but is eager for 
increased USG advocacy support - in addition to the DOC 
advocacy plan already underway.  Septel will report on the 
political aspects of the French state visit.  End Summary. 
 
--------------------- 
"Eskom's French Kiss" 
--------------------- 
 
¶2.  (SBU) French President Nicholas Sarkozy was accompanied 
by 40 senior business executives, including Areva, EDF, and 
Alstom, on his February 28-29 state visit to South Africa. 
His visit was crafted to advance economic and commercial 
bilateral ties, particularly in energy.  "We will fight to 
get the overall power plant market, coal and nuclear," 
Sarkozy told a meeting of representatives of South African 
and French Companies in Cape Town on February 29. 
Westinghouse and Areva are competing for nuclear power plant 
supply contracts in South Africa in a first tranche of 3,500 
MW and in a second tranche of a fleet of up to 20,000 MW 
through 2025, potentially worth up to $133 billion (Refs C 
and D).  The recent power supply crisis has created a greater 
sense of urgency, although new nuclear power plants will come 
on line over a long time frame (Ref A).  Sarkozy and the 
French delegation were able to orchestrate the following 
announcements over the course of the visit, intended to 
advance the Areva bid: 
 
- - State electricity supplier Eskom announced a contract 
with Alstom to provide six turbines at the new Bravo 
coal-fired power plant in the northern province of Mpumalanga 
(worth $2 billion).  Alstom is already furnishing six 
turbines for the new Medupi coal-fired power plant in 
Limpopo, also in the north.  Alstom announced intent to 
source at least 50 percent of the combined contracts locally. 
 (Note: Hitachi Power Africa, which won the lucrative boiler 
contracts for the Medupi and Bravo plants, has as a 25 
percent shareholder empowerment firm Chancellor House, which 
was exposed as a front for the ANC.  End Note.) 
 
- - Sarkozy offered to immediately send a team of engineers 
to help Eskom overcome the power supply crisis and its 
technical skills shortage. 
 
- - Sarkozy announced his intent to establish an investment 
fund of Euro 250 million to assist French companies to invest 
in the South African renewable energy and high technology 
sectors.  He urged South African businesses to change their 
"Anglo-Saxon mind-set" and look upon France as a reliable 
investment and trading partner. 
 
- - Areva signed a number of nuclear skills development 
agreements with South Africa's Nuclear Energy Corporation 
(NECSA).  Areva said that a joint venture between Areva and 
Q(NECSA).  Areva said that a joint venture between Areva and 
NECSA would increase training in technology and energy of 
disadvantaged South Africans.  The companies also agreed to 
extend an existing program to train nuclear engineers in 
France. 
 
- - Eskom and the French development agency AFD signed a 
financing framework agreement as a precursor to the 
conclusion of a Euro 100 million, 20-year loan for the 
financing of Eskom's new wind farm project in the Western 
Cape. 
 
- - Areva Transmission & Distribution Automation announced 
intent to work with its partner Alstom South Africa on 
smart-metering and smart-grids to help the SAG implement its 
National Response Plan to curb energy usage by residential 
customers.  Alstom SA recently completed Eskom's new National 
Control Center. 
 
- - Areva and Rio Tinto Alcan signed a contract to build a 
conversion sub-station to supply direct current for Rio 
Tinto's new aluminum smelter in Port Elizabeth (worth Euro 80 
million).  The status of this project has been uncertain with 
recent power supply woes. 
 
- - Areva announced its intent to partner with various 
entities in South Africa to build the EPR (new nuclear power 
plants) fleet and develop different aspects of the nuclear 
industry, from manufacturing and uranium beneficiation. 
Areva built the twin reactors for South Africa's Koeberg 
nuclear power station near Cape Town, and has sought to 
convey the perception that this gives it a head start for the 
new tender. 
 
------------------------------ 
Westinghouse Still in the Game 
------------------------------ 
 
¶3.  (SBU) Westinghouse Regional Vice President Rita Bowser 
told Energy Officer on March 3 "we are still in the game and 
we are holding are own," and they aimed to fight hard and 
counter the French messages.  She observed that Sarkozy and 
his delegation did what was expected and accomplished what 
they have done elsewhere, noting that many of the announced 
agreements were recycled old ones or announcements of intent. 
 Bowser said that Westinghouse was in negotiations with Eskom 
during the visit and their interlocutors said they had 
received no instructions to change the process.  She stated 
Eskom would submit its technical recommendation to the SAG in 
June, after which there would be some sort of political 
vetting before the final decision. 
 
¶4.  (SBU) Bowser outlined a number of actions Westinghouse 
had taken or intended to take to counter the French splash. 
Westinghouse briefed Commerce Assistant Secretary Israel 
Hernandez in advance of his March 10 visit to South Africa. 
Westinghouse has asked the Secretaries of Energy and Commerce 
to write letters in their behalf.  Westinghouse just signed a 
technology sharing terms of reference agreement with NECSA. 
She said Westinghouse was close to signing a new shareholders 
agreement for the Pebble Bed Modular Reactor (PBMR), where 
Westinghouse holds a 15 percent share.  The signing could 
offer another hook for a public announcement.  Bowser hoped 
that the USG could seek opportunities to highlight messages 
such as the U.S. and Japan representing the number one and 
two export markets for South Africa.  She expressed the 
desire that the USG would facilitate some opportunities for 
"human interaction" advocacy on Westinghouse's behalf. 
 
------------------------------------- 
COMMENT - What is the "U.S. Package"? 
------------------------------------- 
 
¶5.  (SBU) It will be a challenge to overcome the high-level 
and timely French advocacy on behalf of the "French package", 
which will have made a strong impression on senior SAG 
officials who will have the last voice in the political 
vetting of the new nuclear build tender.  Department of 
Qvetting of the new nuclear build tender.  Department of 
Minerals and Energy (DME) Chief Director: Nuclear Tseliso 
Maqubela asked Economic Counselor in a meeting last year: 
"what will be the U.S. package?" refering to the new nuclear 
build tender.  Westinghouse is a strong contender for the 
tender on merit, particularly with respect to its proposals 
for localization, technology transfer, and training, for 
which it can point to its track record in Korea and 
elsewhere.  For example, with respect to ASGISA (Accelerated 
Shared Growth Identification for South Africa) criteria, 
Westinghouse competes strongly, as it has quantified up to 
2500 new jobs from its localization scheme.  Embassy 
organized a dinner in February for Westinghouse Senior Vice 
President Dan Lipman to present Westinghouse's localization 
proposal to SAG officials from four relevant Departments.  At 
the dinner, Department of Public Enterprises Director: 
Special Projects Edwin Ritchken told Economic Counselor the 
tender decision would be based on "the fuel cycle", which 
could broadly include fuel enrichment and processing and 
spent fuel reprocessing.  Although the new nuclear build 
tender does not specifically include these items, the SAG 
draft energy policy from last year calls for potential 
beneficiation and self-sustainment in these areas, and the 
"French package" may extend the "fuel cycle" at both ends to 
include these.  The Westinghouse proposal includes broad and 
sophisticated fuel technology and manufacturing, but not/not 
enrichment and fuel reprocessing. 
 
¶6.  (SBU) The USG could consider building on the DOC advocacy 
campaign underway with additional contacts.  For example, 
Minister of Minerals and Energy Buyelwa Sonjica will be 
leading the SAG delegation at the Washington International 
Renewable Energy Conference (WIREC) March 4-6.  State, DOC, 
and DOE officials could take advantage of this opportunity to 
express USG support for Westinghouse.  Post is also working 
with DOC, SAG, and Eskom to organize an ASME (American 
Society of Mechanical Engineers) standards conference to 
encourage South African nuclear suppliers to adopt ASME 
standards as a means to participate in Westinghouse's global 
supply chain. 
BOST