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FRANCE: China Deal Gives Lift to Revival of Fission

by John TagliabueNew York Times
November 27th, 2007

Areva, the French nuclear power giant, signed the largest deal in the industry's history Monday, with China's leading nuclear power company.

The agreement will bring both technology and much-needed energy to China, which has the world's fastest-growing appetite for energy. But the deal could prove an even greater boon to Anne Lauvergeon, Areva's chief executive, whose strategies - and optimism - have been questioned by critics.

The reasons for skepticism are clear. In recent years, nuclear-powered countries - like the United States, Germany and Japan - have refrained from building more plants, and countries like Italy and Poland, who had none, have refused to plunge into the nuclear age. But as today's deal illustrates, the business of nuclear energy has come alive again, and it is people like Ms. Lauvergeon, her steely temper softened by a lively manner and a captivating laugh, that are bringing it back to life.

"A nuclear renaissance is now gearing up everywhere in the world," said John B. Ritch III , a former American diplomat and director general of the World Nuclear Association, an industry group. "It is occurring parallel to an enormous expansion in energy consumption."

The daughter of a professor and the niece of an archaeologist, Ms. Lauvergeon felt drawn to antiquity as a girl - until her uncle took her on her first dig one summer.

"I discovered it was a lot of dirt, dirty hands, and crawling around on all fours," Ms. Lauvergeon, 48, said, explaining how her interest shifted from the past to the future.

Ms. Lauvergeon's long path from dirty hands to clean energy took some unexpected turns, including ones through the halls of power at the Élysées Palace, where she served as a top adviser to François Mitterrand, and into the bastions of the very male business world, leaving her, in the end, one of the most powerful women in corporate Europe.

Ms. Lauvergeon grew up in Orleans, the heartland of France, where her father was a professor of geography. Her interest in the past gradually made way for college studies in chemistry and physics, leading to a degree from the École des Mines in Paris, an elite engineering school.

After graduation she worked for several French companies, including the former Usinor steel company, now part of the Arcelor-Mittal steel group. In the first half of the 1990's, she was Mr. Mitterrand's lead aide on international trade issues. In 1995, she became a partner in Paris at Lazard Frères, spending several months in the investment bank's New York office.

Today, Ms. Lauvergeon spends much of her time on the road, selling Areva's nuclear products and services. When she is in Paris, she makes time to drop off her two children, ages 8 and 4, at their private school.

"I started late," she confesses. Her husband, Olivier, is also in business.

Even as the nuclear industry opens new projects around the globe, the industry has been consolidating. After Toshiba's $5.4 billion takeover of Westinghouse, General Electric and Hitachi joined forces in a $2 billion deal. Russia has carved Atomstroyexport, the Russian nuclear power company, out of the old Soviet atomic energy ministry.

In France, Ms. Lauvergeon assembled Areva in 2001 from the bickering factions of France's state-owned nuclear establishment, the fuel company Cogema and the reactor builder Framatome, creating arguably the world's only one-stop nuclear shop, selling uranium, reactors, fuel reprocessing and waste storage.

It was around this time that she first visited a nuclear reactor. "It was clean, very modern, and I was impressed by the idea that a tiny amount of uranium produced a huge amount of energy," she said. And this, she added, despite her being at the time, "very ecolo," French slang for environmentalist.


"At the time, many said we had no future," she recalled. "I said, 'We have a future, and we should invest.' In this new situation, we're very attractive."

Of course, much of the increasing appeal of nuclear power has to do with the rising cost of oil and the need to reduce the level of greenhouse emissions. Companies like Westinghouse, General Electric and Areva, which design and build nuclear power plants, are taking advantage, landing contracts in Asia and even turning their sights on Western countries, like the United States.

"It's not expensive, and the costs are totally predictable," Ms. Lauvergeon said recently in her office in a meticulously restored Art Deco building in the center of Paris. "The cost of uranium is only 5 percent of your costs." Moreover, she said, nuclear energy is not dependent on foreign sources of fuel and produces no greenhouse gases.

Not everyone shares her enthusiasm. "Currently there is no safe way to deal with radioactive waste," said Nathan Argent, who follows the industry for Greenpeace, one of many antinuclear groups. They argue, moreover, that the spread of nuclear technology leads to the proliferation of atomic weapons.

Ms. Lauvergeon insists Areva is not in the business of proliferation. ''Without ambiguity, we don't accept to do business with countries that don't accept, without doubt, international controls," she said.

Some governments heed their antinuclear constituencies. Germany, once a leader in nuclear energy, is committed to exiting nuclear energy by 2020; Sweden is similarly committed to phase out its nuclear plants by 2010.

But Ms. Lauvergeon highlights Areva's experience in converting spent fuel into mixed oxide, or MOX, pellets that can be burned in nuclear reactors. She can speak with conviction because France, unlike most of the world, never backed away from atomic power. Roughly 80 percent of the country's electricity is generated by nuclear plants.

The new government of President Nicolas Sarkozy is giving Ms. Lauvergeon a helping hand. Addressing the United Nations, and on trips to Mediterranean countries, notably Libya and Morocco, Mr. Sarkozy has promoted French nuclear technology.

And he was present at the signing of the Areva-CGNPG agreement, according to Xinhua.

Areva will supply the China Guangdong Nuclear Power Group with two cutting-edge nuclear reactors in the city of Taishan in the southern province of Quangdong. Areva will also help run and maintain the plants, whose design will include a European pressurized water reactor, or EPR.

Under the 8 billion euro ($11.86 billion) deal, Areva will also cooperate with the Chinese on future civilian nuclear energy, including the reprocessing of spent fuel.

In the first nine months of 2007 Areva generated revenue of $11.6 billion, up 6.8 percent from the year before, building power plants, but also mining and processing uranium, and disposing of spent fuel. Its order book in the first half-year was up 30 percent, at $45 billion, before the Chinese deal.

Areva is currently building two new EPR plants in France and in Finland.

But Ms. Lauvergeon faces strong competition from companies like Westinghouse, General Electric and Atomstroyexport. She says she is not fazed, noting that Areva is taking the battle to Westinghouse's home turf: it reached a joint venture with Constellation Energy, a Baltimore utility, to sell its power plants in the United States, and it is cooperating with Électricité de France, the French utility, to penetrate the American market.

Now Areva needs cash to grow, and the French government is considering all options, including selling shares in Areva. Less than 5 percent of Areva trades on the Paris exchange, in nonvoting investment certificates; a possible merger with the French turbinemaker Alstom would create an even more muscular competitor. This likelihood has driven Areva's shares up more than 50 percent over the last year. Ms. Lauvergeon says she favors joining with "one or two industrial partners."

But the centerpiece of Ms. Lauvergeon's sales pitch is of course the EPR, which she has sold to China. Areva is building the first of its kind in a dark pine forest in Finland. But the Finnish project is years behind schedule and news reports have set cost overruns as high as $1 billion.

Ms. Lauvergeon, who says Areva does not publish the provisions it makes for such losses, acknowledges that the company is unlikely to make money on the project. But she even puts an optimistic spin on the loss.

"It's an investment, an incredible show window," she says.

Apparently, the Chinese agreed.




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