In a major blow to the French nuclear industry, France has just lost a 20.4 billion-Euro-bid to supply four 1,400 megawatt nuclear reactors to the emirate of Abu Dhabi, the winner being a South Korean consortium led by the public sector electricity giant Kepco. The contract, made public on December 27, calls for the “conception, construction and assistance in the running” of four nuclear reactors of 1,400 megawatts each.
South Korean President Lee Myung-Bak went home triumphant after an official visit to Abu Dhabi with a done deal and a contract in his pocket, much to the chagrin and consternation of the French who were certain they would be awarded the coveted prize. The Kepco-led Korean consortium also includes Hyundai, Samsung and more importantly, the Japanese Toshiba-Westinghouse combine, who are among Areva’s most fierce competitors.
This development could seriously undermine France’s attempts to become the biggest player in the lucrative field of civilian nuclear technology. The French bid, put together by a consortium that included EDF, the state-run electricity company, GDF Suez, Areva, petroleum colossus Total and Vinci, had proposed the construction of a 1,650-megawatts third generation French EPR or Evolutionary Power Reactor.
To say that the French are immensely disappointed would be an understatement. President Nicolas Sarkozy himself indulged in some very aggressive sales talk during his trips to Abu Dhabi and Claude Gueant, the General Secretary of the Elysee Presidential Palace, made repeated visits to the sheikhdom these past 18 months.
In a terse interview published on Monday, President Sarkozy’s right hand man often described as his eminence grise indicated that “lessons will have to be learnt from this disappointment.” Mr. Gueant suggested that the Korean consortium had won the contract because it had proposed very competitive electricity tariffs and dismissed suggestions that safety concerns, delays and cost overruns in the construction of EPR reactors in Finland and France could have affected French chances. He did admit however, that the French side had been slow to get its act together.
Safety concerns about the “command and control” chain of the EPR reactor had been made public by three national nuclear safety agencies in Britain, Finland and France ( The Hindu, November 7, 2009). In an unusual joint statement, the three national nuclear safety agencies had pointed to severe design flaws in the reactor while underlining that Areva was cooperating with them to make the necessary changes. The EPR, which the French proudly describe the as “the best and safest reactor ever made,” has yet to prove its technology. There are only four such reactors under construction in the world, one each in France and Finland and two in China. But all four sites have encountered construction delays and cost over-runs which have added to the already high cost of the reactors — about four billion Euros each.
France has decided to take the blow on the chin and put up a brave face so as not to jeopardise other profitable contracts in the Emirates, especially the sale of 60 Dassault-made Rafale combat aircraft which are competing against American F-16s and the European fighter-bomber, the Eurofighter. Since it was first made some 30 years ago, France has failed to sell a single one of these aircraft outside its borders. Contracts with Brazil and Abu Dhabi are still to be finalised and despite intense French lobbying, India too has been chary of investing in what has been described as the world’s most expensive fighter aircraft. Two Rafale crashes on the same day last September prompted the Brazilians to delay their decision and ask the French Defence Ministry for more information.
These developments do not augur well for President Nicolas Sarkozy either politically or economically. Regional elections to be held in March will be a test of the government’s popularity. Mr. Sarkozy has seen his popularity ratings dip severely in recent months and has launched public debate on “French national identity” in an attempt to capture the growing extreme right vote. Unfortunately for him, the debate has turned nasty, giving free reign to the expression of extremely base, hate-filled sentiments, especially in regard to immigration and Islam. His strategy therefore could boomerang - success with extreme right voters contrasting sharply with losses at the centre.
Economically too, France is facing difficulties with steadily rising unemployment figures despite a faltering return to growth. Areva is poised to cut another 5,000 jobs and the loss of the Abu Dhabi contract could be interpreted as a personal failure for the President.
The state plays a significant role in the energy sector in France. It has majority shareholding in EDF and Areva but also holds 36 per cent of GDF Suez. Mr. Sarkozy is aware of the state’s responsibility in keeping and augmenting France’s competitive edge in the nuclear sector. For the moment China, with its massive nuclear programme, appears to be the surest market from the French perspective.
India has the EPR in its sights as it scrutinises its nuclear options and Mr. Sarkozy, who is scheduled to visit the country on March 5, 2010, will no doubt to engage in some more nuclear hard sell while in New Delhi.
