Whenever the French are called on to justify their state-heavy approach to business, they can point with justifiable pride to what they call their
filière nucléaire. This is the assortment of businesses that design, build and operate the 58 nuclear power plants that generate 75% of France's electricity. French President Charles de Gaulle willed the nuclear state into being in the late 1950s, and it grew up in his portentous shadow to become one of the brightest jewels in France's industrial crown. It has given the French, among other things, cleaner air and cheaper electricity than any of its neighbors have, not to mention an energy export worth nearly $4 billion annually.
France waited a long time for the rest of the world to warm up to nuclear power. Now that it has, the country is counting on seasoned nuclear veterans like the utilities Electricité de France (EDF) and GDF Suez and the nuclear plant designers and engineers Areva and Alstom to raise the tricolor atop reactors from Argentina (one reactor planned) to Vietnam (four reactors planned). Vinci and Bouygues, the construction giants that do much of the heavy lifting on France's reactor projects, would be expected to pour the concrete. With the world short of power, some 200 nuclear plants will be built (and another 300 are under proposal) in the next 20 years.
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But in this global nuclear summer, France's prospects have cooled. Not only has the French industry suffered an embarrassing setback overseas, but its nuclear grandees can barely stand to look at one another, its new European Pressurized Reactor (EPR) — the only one on offer — is a Rolls-Royce in a Chevy economy, and the first two EPRs are taking longer to build and costing far more than anyone dreamed.
The French have even started to wonder whether the very Gallic attitudes that have shaped the country's glorious past — among them, a confidence in France's prowess bordering on arrogance — may impair its future nuclear success. The French have never been gifted team players — witness the fratricidal frenzy that engulfed Les Bleus, France's once champion soccer team, during the World Cup. In the past, the
filière responded on command to the government for the glory of French industry. But in a more market-driven world, French companies have become even less amicable. "It's very difficult to change something that goes so deep," says an executive at a leading nuclear supplier. "We're in the middle of the stream between a very centralized system and a very diverse marketplace, and we can't waste time. The competition is here."
The competition is from the U.S., South Korea and Japan, and each can assemble consortia to deliver turnkey nuclear plants with greater ease than France's bickering companies. Without a strong guiding hand, France's
filière has a tendency to unravel in chaos and acrimony, as it did recently over a job in the United Arab Emirates, where the French were vying last year for a $20 billion contract to build four reactors. The U.A.E. craved France's nuclear know-how from the outset. The contract was France's to lose, and lose it France did.
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The first problem was EDF. The U.A.E. badly wanted the big French utility to run the whole show, but EDF wanted no part of a desert project in a developing country. Instead, the disappointed U.A.E. got a leaderless consortium comprising Areva, GDF Suez, Alstom and oil giant Total, a nuclear wannabe. By the time the French government forcibly dragged EDF to Abu Dhabi in December, it was too late. "It was like the village of the Gauls in the
Astérix comics," says an executive. "It was a complete mess — a mix of clannishness, personal ambition and hatred."
Two weeks later, the U.A.E. announced that a consortium led by the South Korean utility Kepco had snatched the prize. "Korea was very well organized, which was not the case with us," says Jacques-Emmanuel Saulnier, an Areva spokesman. "In Abu Dhabi, we learned that we have competitors and that they're pretty dynamic."
The disaster in the desert exposed other cracks in France's nuclear core. The French built all their reactors in the previous century. From 2000 to '04, they built exactly none. "Imagine an airplane manufacturer that didn't make any airplanes for four years," says a French nuke executive.
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Meanwhile, the South Koreans and the Japanese — ever wary of their dependence on imported oil — have been steadily turning out nuclear reactors. Kepco is constructing two of the APR1400 reactors it sold the U.A.E. "The Koreans can point to a good record of building on time and on budget," says Steve Kidd, director of strategy and research at the World Nuclear Association.
It was partly to put its nuclear hard hats back to work that Areva agreed to build its first new-model EPR in Finland, at cost, for about $3.8 billion. That's also largely the reason the French are building a new EPR at home in Flamanville, with a third planned at Penly. The French team badly needs the practice — particularly EDF and GDF, which have no role in Finland's Olkiluoto reactor. (Finnish utility TVO is the operator there.)
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"We don't need Flamanville for France's energy consumption, and if we build another EPR at Penly, France will have 100 billion kilowatt-hours too many by 2020," says Dominique Finon, a director of nuclear research at France's prestigious think tank Centre National de la Recherche Scientifique. "It's a very expensive way to relearn nuclear."
Expensive, indeed. The Olkiluoto EPR is already set to cost almost twice its initial budget, and the meter is still ticking, while the start date keeps getting pushed back. The Finns announced in May that they've moved it again, this time from 2012 to 2013, four years late and counting. Flamanville is $1 billion over its $4 billion budget and a year late so far.
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Areva says that's normal for the first units of a new design, and that's correct — to a point. There's also no doubt Olkiluoto has given France a black eye. Areva CEO "Atomic" Anne Lauvergeon has battled constant rumors that she would be fired, but she is expected to keep her job at least until her contract runs out in June 2011. Many people believe, however, that French President Nicolas Sarkozy would love to get rid of her. Lauvergeon, a celebrated executive who assembled Areva into a nuclear powerhouse, is not an easy target. "She's a scary adversary, not the kind of girl who will leave quietly," says an insider.
Another leading actor who has been trying to shove Lauvergeon offstage is Henri Proglio, whom Sarkozy tapped to run EDF last year. Proglio and Lauvergeon are currently bickering over Areva's Eurodif plant in southeastern France. Eurodif is the perfect symbol of the way the old
filière nucléaire worked. It was set up under de Gaulle to enrich uranium exclusively for EDF in an era when price didn't really matter. But now it does, and EDF wants a better deal. That could end up costing Areva 1,000 jobs and causing a nearly $650 million operating loss before a new Areva enrichment plant comes onstream in 2013.
On the face of it, that's not an insurmountable problem — except that no one seems able to surmount it. The government has stepped in several times to reconcile its two fractious wards, since France owns 85% of EDF and 88% of Areva. All for naught. "Antipathy explains everything," says an executive for one of them. EDF and Russia's Rosatom agreed in June to cooperate on R&D, but Rosatom also makes reactors. Will EDF forge an even deeper partnership with one of Areva's big rivals? It is a very sensitive question.
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France has set itself the ambitious goal of taking a third of the global market for new nuclear building — a goal the World Nuclear Association's Kidd calls "optimistic." France now has about 7%. To reach the goal, it probably needs a cheaper reactor in its product portfolio.
Overdesigned for the post-Chernobyl freak-out, the EPR can withstand earthquakes, airplane crashes and missile strikes, among other disasters. This is very reassuring — and very expensive. "The reactors we have are a little too elaborate," says Paul Rorive, corporate director of nuclear activities at GDF Suez. "Does everybody really need all those options?" An Areva executive estimated that megawatt for megawatt, the EPR is probably 25% more costly than Kepco's APR1400.
Team France might have had a better shot in Abu Dhabi if it had pitched the smaller, cheaper Atmea1 reactor designed jointly by Areva and Japan's Mitsubishi. Although the reactor exists only on paper, Jordan has approved the design for an upcoming bid, and GDF Suez will try to close the deal next year. Areva wants to build it. "We need the Atmea because our clients need it," says Areva's Saulnier.
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The industry also needs leadership. A long-awaited study commissioned by the French government was finally released last week. Following its recommendation, the Elysée Palace announced that EDF will henceforth be the undisputed leader for France's nuclear export program. The government also made clear that it wants EDF to buy as much as 15% of Areva, which is pretty much guaranteed to ruin Anne Lauvergeon's day.
De Gaulle, France's postwar nationalist icon, is enjoying a surge in popularity these days. The French miss his single-minded, stubborn willingness to put what he saw as France's interests before petty concerns. But there's no reverting to the nuclear model he molded. Moreover, it would be a big mistake for the state to right this listing ship by taking back the tiller.
"Everybody is trying to find his place. I don't even know what the
filière nucléaire means anymore," says Rorive. "The old model worked for 40 years. But the world is different now, and perhaps it's time to change it." Individually, the parts of France's nuclear enterprise are some of the best in the world. Now France just has to figure out how to make them add up to a whole that isn't less than their sum.
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