Areva Markets Nuclear Power And Itself
The Wall Street Journal Europe, November 12, 2003
By John Carreyrou
Blackouts this year in the U.S., Scandinavia and Italy were a
stark reminder that the world has yet to figure out how to meet its soaring
power needs without messing up the environment.
Areva SA, a large but little-known company owned by France, thinks it has
the answer: nuclear power.
The world's biggest builder of nuclear reactors and recycler of nuclear
waste, Areva aims to go public next year. It is pitching itself to
potential investors on the controversial premise that nukes are making a
comeback -- and that the in industry that spawned Chernobyl is actually
good for the environment.
To make its case, Areva has embarked on a global marketing campaign that
takes as much from the fashion industry as it does from the grubbier world
of electricity. Areva's chief executive, Anne Lauvergeon, hired a former
top executive from fashion house Hermes to gussie up nuclear power's image.
Television and newspaper ads in France several years ago featured a
predecessor company's slogan: "We've got nothing to hide. Come see."
And to prove that point, Ms. Lauvergeon had Webcams installed at a
nuclear-waste recycling plant in Normandy, the largest repository of
radioactive material on Earth. Cameras piped live shots of the plant's
interior to a Web site for public viewing. The French government ordered
the cameras turned off for security reasons after the Sept. 11
Unlike coal and natural gas, nuclear plants don't emit greenhouse gasses.
Given that wind and solar energy have yet to become large-scale energy
sources, Areva argues that nuclear plants are the only way to substantially
boost power production without damaging the environment.
In preparation for an initial public offering, Areva has been hosting
meetings with investors and analysts. Bertrand Barre, a company engineer,
says he tells these gatherings that the climate disruption wrought by
global warming coupled with a projected doubling of power consumption over
the next 50 years presents the world with "an impossible equation." He
adds, "That's when I pull nuclear energy out of my hat."
But at this point, it is still an open question whether nuclear power is
really undergoing the resurgence Areva claims. There are 441 operable
nuclear reactors in the world today, accounting for about 17% of global
power production, according to the World Nuclear Association. The 104
reactors operating in the U.S. generate 20% of its power. France's 59
reactors generate 80% of its power. But the U.S. and Western Europe, the
world's biggest power consumers, haven't added a reactor in years. Germany
swore off nuclear power in 2000, although it plans to keep using its 19
reactors until they reach the end of their life span. Sweden is doing the
On the other hand, Finland recently decided to build a fifth nuclear
reactor, citing greenhouse pollution as one of its reasons. A consortium
led by Areva was selected last month as the preferred bidder for the
estimated 2.5 billion euro contract. In France, where public opinion is
divided on nuclear power, the country's industry minister has said she
supports building a new reactor.
"Globally, things are beginning to move" toward nuclear power, says Ms.
Lauvergeon. "What's happening in Finland is going to happen in a certain
number of countries."
Peter Fraser, a senior policy adviser with the International Energy Agency,
is more cautious. He doesn't foresee a reactor-building spree in
says growth in the U.S. will depend on government financial incentives for
operators. "Asia is where a lot of the growth potential is, especially
China," he says.
Roughly 30 new nuclear plants are being built, most in Asia and Eastern
Europe. Rising concern about dependence on Middle East oil since Sept. 11
has helped rekindle interest in nuclear power among some Americans. It has
been 25 years since the U.S. built its last nuclear plant, but the
Department of Energy last year published "Nuclear Power 2010," to encourage
power-plant operators to start building new reactors by the end of the
decade. The agency has earmarked $388 million (337.6 million euros) in 2004
for nuclear energy.
Still Areva, which has more than 50,000 employees and reported 8.3 billion
euros in revenue last year, faces enormous skepticism in its quest to sell
the public on an industry until recently thought to be on its last
Memories of the Chernobyl disaster in Ukraine are still fresh. In
reactor exploded, exposing an estimated 4.9 million people to
causing at least 45 deaths and thousands of cancer cases. Last year, a
boric-acid leak almost ate through the lid of a reactor at the Davis-Besse
nuclear plant in Oak Harbor, Ohio. It was the most extensive corrosion ever
found on a U.S. reactor.
The nuclear-power industry also hasn't convincingly addressed its two
biggest problems -- what to do with nuclear waste that remains radioactive
for millions of years, and how to ensure that uranium or plutonium that
could be used for bombs doesn't fall into the wrong hands in an age of
Areva's public offering would be a test of Ms. Lauvergeon's thesis that
nuclear power is on the verge of a rebound. Of Areva's competitors,
state-owned: Russia's Minatom Group and the U.K.'s British Nuclear Fuels.
The third, General Electric Co.'s GE Nuclear Energy, is a small part
The French government, which owns 93% of Areva, hasn't decided whether it
will sell its stake to the public. But it is widely expected to, having
recently hired an investment bank. Ms. Lauvergeon says the offering could
happen as early as March. Areva is already technically listed on the Paris
Stock Exchange in the form of investment certificates, although they
represent just 4% of the company.
Areva is the child of three decades of nuclear research and engineering,
dating back to France's decision in the early 1970s to lessen its
dependence on Middle East oil. To jump-start its efforts, the French
government bought Westinghouse's stake in a reactor-making joint venture
with a French company. The Westinghouse joint venture was called Framatome,
short for "France-America Atom." Separately, the state agency that built
France's nuclear bomb created Cogema, a company to mine and enrich uranium
and recycle nuclear waste.
By the time Ms. Lauvergeon was appointed in 1999 to head Cogema, the bigger
of the two state companies, it had been destabilized by years of attacks
from environmentalists and had developed a culture of paranoia. "It was
kind of a bunker," recalls Ms. Lauvergeon, 44 years old, a former aide to
the late French president Francois Mitterrand.
One of her first decisions was to move Cogema's headquarters from a gritty
Paris suburb to a building in the city center with a giant glass
to symbolize transparency. Ms. Lauvergeon ordered Webcams at the large
Cogema recycling plant and started announcing train shipments of nuclear
waste to the recycling plant from Germany.
For years, Greenpeace, the environmental group, had denounced the secrecy
surrounding the shipments and had sent some of its activists to lie
front of the trains. Ms. Lauvergeon let her executives appear on TV talk
shows, reversing the previous management's policy of ignoring media
In 2000, Ms. Lauvergeon received the results of an energy study she had
commissioned that showed that global warming was beginning to alarm the
public. She decided to use it as a powerful argument to promote nuclear
Ms. Lauvergeon lobbied the government to merge Cogema and Framatome, which
had become bitter rivals, to create the world's biggest nuclear-engineering
company. She got her way in September 2001, and renamed the company
The next month, Ms. Lauvergeon hired Alain Bucaille, the former No. 2
executive of Hermes, to improve nuclear power's poor image. He applied some
of the brand-marketing techniques of luxury-goods makers to nuclear energy.
Mr. Bucaille also developed an advertisement for TV and the Internet
showing a pressure cooker with a soundtrack of noise that grows louder and
louder until the screen goes dark -- a metaphor for global warming.
ends with the question: "Could nuclear energy be part of the
In early 2002, Areva sponsored France's yacht in the America's Cup
a bid to improve its name recognition in the U.S., where Areva generates
1.7 billion euros in revenue a year. The Nuclear Regulatory Commission has
extended the life span of 15 U.S. reactors to 60 years from 40 years
boon for Areva, a leader in reactor maintenance. Areva hoped to win
The race took place in Auckland, New Zealand, where 17 years before French
agents had sunk the Rainbow Warrior, a Greenpeace boat protesting French
nuclear-bomb tests in the South Pacific. Greenpeace saw Areva's sponsorship
as a provocation and Frederic Marillier, one of its activists, called it
the "height of contempt." So, when the greenish yacht, sporting
red letters on its bow, embarked on its maiden sail from Brittany, a
Greenpeace motorboat rammed it and damaged its hull. The Areva yacht ended
up finishing second-to-last in the America's Cup race, but Areva says it
got lots of positive media exposure.
Whether the PR blitz helped is unclear. But Areva recently won two
high-profile DOE contracts: one to help with the storage of U.S. nuclear
waste in the Yucca Mountain in Nevada; and another to transform the
Pentagon's excess plutonium into fuel for nuclear plants. Areva also has
clinched 10 U.S. contracts to replace the massive lids on nuclear reactors,
which each cost 15 million euros.
But while Areva has trumpeted the lid replacements as evidence of its
promising prospects, they are also a reminder of the risks inherent in
nuclear power. The replacements were prompted by the mishap in Ohio last
year. Ms. Lauvergeon says the leak at Davis-Besse "is very bothersome" but
that the averted accident wouldn't have been anywhere near as
Another danger was highlighted by Greenpeace earlier this year. Every week,
Areva trucks take plutonium from the company's plant in Normandy to another
plant in the south of France 960 kilometers away, where it is turned into
reactor fuel. In February, Greenpeace activists immobilized one of the
trucks for three hours in the French town of Chalon-sur-Saone to make the
point that the convoys are vulnerable to attack.
Ms. Lauvergeon plays down the incident, saying the plutonium transported
isn't weapons-grade, the trucks are escorted by police cars and special
mechanisms make them impregnable. Mr. Marillier says each truck carries
enough plutonium to make 15 Hiroshima-size bombs. "As long as Areva handles
plutonium, it won't be just another company," he says.
But global warming has caused some environmentalists to make peace with
nuclear power. James Lovelock, the British scientist who was one of the
founding fathers of the Green movement, has become actively pro-nuclear.
Nuclear energy "is the only clean source of energy we have as far as the
atmosphere goes," he says.
Ms. Lauvergeon maintains that if nukes don't stage a comeback, Areva is
still an attractive investment because it will take decades to phase out
the world's nuclear-power infrastructure. That will guarantee steady
business from uranium mining, reactor servicing and waste recycling, she
says. Last year, Areva earned a profit of 250 million euros without a
single new reactor order. Its investment certificates have risen 38% this
year, valuing Areva at 6.8 billion euros.
"I carefully weighed the pros and the cons and decided that what Areva has
told me makes sense," says Joseph Ourghoulian, who manages the $500 million
Amber Fund for SG Cowen in New York and has invested in the thinly traded
At Areva's plant in Normandy, 8,000 tons of highly radioactive spent fuel
sit in four giant pools to cool for several years. Most of it eventually
will be recycled to create new reactor fuel, but part will produce unusable
waste that will be fused with a special glass for long-term storage. The
pools' contents alone are enough to keep the plant busy for the next eight
years and represent billions of euros in future revenue for Areva.
"These are our assets," says Philippe Pradel, Areva's director of
reprocessing, standing at the edge of a pool. "As long as these pools are
full, we'll be fine."
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