FRANCE AGGRESSIVELY PROMOTES NUCLEAR ENERGY TIES

UNCLAS SECTION 01 OF 02 PRETORIA 000747 SIPDIS SENSITIVE BUT UNCLASSIFIED SIPDIS DEPARTMENT FOR ISN/NESS/CMARTIN DOE FOR NE/AHAN COMMERCE FOR DOC/ITA/USAFCS/3004 E.O. 12958: N/A TAGS: ECON ENRG IAEA KNNP SENV SF FR SUBJECT: FRANCE AGGRESSIVELY PROMOTES NUCLEAR ENERGY TIES WITH SOUTH AFRICA WHILE WESTINGHOUSE EXPANDS ITS OWN EFFORTS REF: A. PRETORIA 00500 ¶B. PRETORIA 00373 ¶C. PRETORIA 00317 ¶1. (SBU) This is an action request (see paragrah 7). ¶2. (SBU) Summary. France and South Africa seek greater cooperation around energy issues including increased electricity generation from nuclear power. The two countries are expected to sign a cooperative agreement on the peaceful use of nuclear energy in the near future. The French are aggressively pursuing an opportunity to construct South Africa's next nuclear reactor. A SAG vendor selection for the next nuclear reactor is expected in March 2008. Westinghouse will compete with the French for the bid, is gearing up its local marketing efforts and seeks a decision from the U.S. Department of Commerce on its request for advocacy. End Summary. -------------- The French (Nuclear) Connection -------------- ¶3. (SBU) Greater cooperation between France and South Africa around energy issues, including increased electricity generation from nuclear power, was announced at a French-South Africa Energy Conference held in Cape Town by South Africa Department of Minerals and Energy (DME) Minister Buyelwa Sonjica and French Minister of Industry Francois Loos on February 20. Both ministers cited in their opening remarks the long-standing French/South African cooperation in the nuclear sector - notably France's construction and operation of South Africa's sole commercial nuclear reactor near Koeberg in Western Cape Province. Sonjica stated that South Africa expects to sign a cooperative agreement with France around the peaceful use of nuclear energy. Sonjica also used the conference as a platform to describe South Africa's plans to enrich uranium (Septel). Loos said that French parastatal nuclear energy company Areva hopes to win the bid to build a second nuclear reactor in Koeberg and wants to cooperate with South Africa as it develops its Pebble Bed Modular Reactor (PBMR) program. (Note. South Africa's Department of Public Enterprises (DPE) has invested heavily in PBMR which uses 1980's German technology to build low-output, helium-cooled reactors which can be built remotely, transported and installed throughout the power grid. End Note.) In early February, DME requested use of a U.S. energy planning model and sought greater cooperation with the U.S. around broad energy issues (Reftel A). -------------- The Russians Are (Not) Coming -------------- ¶4. (SBU) South Africa parastatal power utility Eskom is expected to announce the scope of plans for construction of one or more additional conventional nuclear reactors at its March 2007 board meeting. Eskom has chosen a pressurized water reactor (PWR) design for construction of at least one reactor which narrows the field of serious competition to Westinghouse/Toshiba and Areva. (Note. GE/Haitachi produce boiling water reactors (BWR) and are therefore out of contention. End Note.) South Korea and Russia have also expressed interest in bidding but are not being taken seriously by industry and government insiders (Septel). (Note. Westinghouse was purchased by Japan's Toshiba in late ¶2006. End Note.) A vendor selection decision by Eskom for the next nuclear reactor is expected as early as March 2008. Eskom is under pressure to build additional capacity as the country suffers from rolling blackouts related to electricity undersupply and aging infrastructure (Reftel B). -------------- Where Are The Americans? -------------- ¶5. (SBU) Westinghouse officials met the Embassy's Economic and Commercial Counselors and Nuclear Energy Officer on February 27 to describe their planned response to Areva's PRETORIA 00000747 002 OF 002 aggressive marketing effort to secure this contract. Westinghouse's AP-1000 reactor design has technical advantages over the Areva design including better passive safety features, a smaller power output more suitable to South Africa's limited power grid and the recent sale of four AP-1000 reactors to China (Reftel C). Westinghouse is also a minority investor (17%) in the PBMR program giving it additional leverage in the reactor selection process. Westinghouse can also demonstrate long-term commitment to South Africa's nuclear program through its participation in PBMR. French parastatal Areva has the advantage of French government support and a network of partnerships with strong political connections. Economic Counselor and Nuclear Energy Officer met with Japanese Embassy Economic Officers February 27 to describe Westinghouse's plans. The Japanese officers were familiar with the competition but said they had not received any advocacy instructions from the Japanese government/Toshiba yet. ¶6. (SBU) Meanwhile, the French have hosted a high-profile conference on energy cooperation pronouncing plans to work together in the nuclear sector. DME nuclear chief Tseliso Maqubela summarized the situation when he told Nuclear Energy Officer February 5 that Areva and the French are "all over" DME and DPE, asking "Where is Westinghouse? - We need to see more of them." According to Westinghouse Senior VP Regis Matzie, Westinghouse is in the process of hiring additional staff to open an office in South Africa, is purchasing a South African nuclear engineering firm, is pushing for a decision on its advocacy request with the U.S. Department of Commerce, and will encourage Toshiba to make a similar advocacy request for the Japanese government. ¶7. (SBU) Action Request. Based on the reaction of SAG officials to the aggressive French campaign, the USG and Westinghouse need to increase their efforts if Westinghouse is to have a serious chance at winning this competition. Embassy requests that the Department of Commerce respond to Westinghouse's advocacy request before the end of March. Embassy also requests that the Department of Energy respond to DME's request for assistance with energy planning and broader energy cooperation to both support Westinghouse and to jump start stalled U.S.-South African nuclear cooperation agreements. ¶8. (SBU) Comment. Local environmentalists are expected to criticize the anticipated Eskom board decision to expand nuclear generation capacity. However, conversion to nuclear energy should have the favorable impact of lowering future CO2 emissions from additional coal-based power plants. This should help mute environmentalist criticism of additional nuclear plant construction. End Comment. BOST