WESTINGHOUSE PUSHES ITS QUEST FOR NEW NUCLEAR

UNCLAS PRETORIA 003078 SIPDIS SENSITIVE SIPDIS DEPT FOR AF/S, EEB/ESC, ISN DOE FOR SPERL, PERSON, BIENAWSKI, AND PARKER E.O. 12958: N/A TAGS: ENRG BEXP TRGY PREL IAEA SF SUBJECT: WESTINGHOUSE PUSHES ITS QUEST FOR NEW NUCLEAR BUILD IN SOUTH AFRICA REF: A. PRETORIA 3061 ¶B. PRETORIA 3012 ¶C. PRETORIA 2494 ¶D. PRETORIA 317 ¶1. (SBU) SUMMARY: Westinghouse believes it is well-positioned to win South Africa's contract for the construction of conventional nuclear reactors based on its advantages in price, safety, modular plant design, and commitment to technology transfer and localization; i.e., insuring benefits accrue to South African suppliers and engineering service companies. Nevertheless, competition with French Areva is likely to be vigorous. End Summary. ¶2. (SBU) Westinghouse of the U.S. (owned by Toshiba of Japan) is expected to compete with Areva of France for construction of conventional nuclear reactors to supplement South Africa's sole existing reactor facility in Koeberg near Cape Town (Reftels). The SAG and state electricity company ESKOM are expected to choose a winning supplier by March 2008 to provide approximately 3 GW of nuclear power in a contract worth up to $6 billion. The USG has approved Westinghouse's application for advocacy based on the provision of thousands of jobs in the US. The SAG has announced its intent to build up to 20 GW of nuclear power reactors over the long-term, thus making the initial contract all the more important. ¶3. (SBU) In a meeting on August 23, Westinghouse local General Manager Rita Bowser explained to Minerals and Energy Officer and Specialist the company's plan for pursuing the contract. Bowser described the SAG's newly announced draft nuclear energy policy as almost tailor-made to support Westinghouse's bid (Reftel B). She cited the clear separation of SAG supply of new nuclear power plants (assigned to ESKOM) from the possible pursuit of nuclear enrichment (assigned to NECSA) and the specification of Pressurized Water Reactor (PWR) for the reactor(s). Bowser identified the following advantages for Westinghouse: -Advantage on price. -Excellence and track record on nuclear plant safety. -Modular plant design (three Westinghouse 1.1 GW plants could meet the SAG requirement, versus two Areva 1.7 GW plants). -Commitment to technology transfer and localization to South Africa. Bowser welcomed Post's advice that Westinghouse stress localization as a bidding factor or requirement in its comment on the SAG's draft nuclear energy policy. Westinghouse has already demonstrated its commitment to localization by organizing supplier workshops and sending SAG officials for training in the U.S. Westinghouse's general philosophy is to build two plants, assist with the building of the next two plants, and support the host government's building the subsequent two plants with its own capacity. This philosophy would fit well to build the first two to three 1.1 GW plants, followed by an additional 13-15 plants over the long-term. ¶4. (SBU) In a series of recent conversations with Economic Counselor and Minerals/Energy Officer, Westinghouse has outlined its strategies for positioning itself to win the nuclear new build contract: -- Complete the acquisition of local nuclear services supplier IST. Although the acquisition is still under review by the Competition Authority, Westinghouse is optimistic that the acquisition can close in early October. -- Work with its local public relations firm to arrange a public campaign to support its efforts. Raising the contract's profile will also insure greater transparency during the award process. -- Work with the U.S. Embassy to support its efforts. Embassy will consider hosting an event marking Westinghouse's acquisition and quest, as well as participating in the new office ground-breaking. Embassy will also participate in a joint call on the Embassy of Japan next week to coordinate U.S. and Japanese government support. -- Raise its public profile and its American flag by joining AMCHAM and becoming a member of the AMCHAM board. AMCHAM has asked and Westinghouse has already agreed to join the board and will participate in the next AMCHAM board meeting on September 19. -- Continue to show its interest in providing fuel and services to the existing plants. Westinghouse was awarded a nuclear fuel supply contract to ESKOM in August according to DME Chief Director: Nuclear Tselio Maqubela. -- Consider working with CSSA on encouraging the American Society of Mechanical Engineers (ASME) to work with South African counterparts to arrange an industry conference as a way of show-casing U.S. technical support and prowess. ¶5. (SBU) According to Westinghouse, French Areva exhibits some advantages in being the supplier for the existing nuclear power facility at Koeberg and providing a critical turbine on short notice last year. On the other hand, the facility has experienced problems and shut-downs, exacerbating electricity shortages in the Cape region. Each problem at Koeberg is an additional boost for Westinghouse as the alternative supplier. Areva also has the reputation of being solely focused on creating jobs back home, and not being as focused on technology transfer and localization. ¶6. (SBU) Economic Counselor and Minerals and Energy Officer used an August 28 meeting with DME Chief Director: Nuclear Tselio Maqubela to make a strong pitch on behalf of SIPDIS Westinghouse, outlining the competitive advantages mentioned in paragraph three. Maqubela recused himself from commenting on Westinghouse's strong points, noting that he is spending half his time consulting for ESKOM. Moreover, noting that there would be competition between Westinghouse and Areva, he said he was now unable to meet one-on-one with any company or associated government officials. Maqubela said he would also have to limit his meetings with the USG as the competition heats up. ¶7. (SBU) COMMENT: Post will continue to work closely with Westinghouse to develop an action plan for advocating its bid. The fact that key SAG officials are already sensitive to not meeting alone or too frequently with U.S. officials indicates that Westinghouse's quest is being treated as a serious bid. Teitelbaum