EDF's Quest for U.S. Nuclear Dominance in Doubt, CM-CIC Says

By Tara Patel

Oct. 16 (Bloomberg) -- Electricite de France SA, the world's biggest operator of nuclear reactors, may struggle to dominate the U.S. market after pulling out of a takeover battle for Constellation Energy Group Inc., according to CM-CIC Securities.

EDF's ``domination will be less flagrant,'' Patrice Lambert-de Diesbach, an analyst at the Paris-based brokerage, said in a note to clients today. The French utility will still retain its position as the only ``operational architect'' of new generation plants, he said.

EDF, which has a 9.5 percent stake in Constellation, yesterday said it wouldn't make a new offer for the Baltimore- based utility because of the ``current state of financial markets.'' That clears the way for Warren Buffett's MidAmerican Energy Holdings Co., whose $4.7 billion bid for Constellation was accepted last month.

EDF and Constellation last year created a 50-50 joint venture called Unistar Nuclear Energy LLC to develop so-called Evolutionary Power Reactors, or EPRs, in the U.S. The latest models are designed by Areva SA, the world's biggest maker of nuclear reactors.

``Unistar couldn't do without EPRs or EDF so the risk would be to see Unistar betting on two reactor models at the same time,'' CM-CIC, which has a `buy' rating on EDF shares, wrote in the note.

The brokerage said that Buffett, a stakeholder in General Electric Co., may favor GE Hitachi Nuclear Energy's own Economic Simplified Boiling Water Reactor new generation model.

`Some Delay'

``There could be some delay in EDF's plans'' in the U.S., Emmanuel Retif, an analyst at Raymond James Asset Management, said by telephone from Paris.

Areva and Bechtel Group Inc. earlier this month won a design engineering contract from Unistar for an EPR at Constellation Energy's Calvert Cliffs plant in Lusby, Maryland.

``It doesn't change anything. We have confidence in Warren Buffett,'' Areva spokeswoman Patricia Marie said today.

EDF will work with several U.S. partners to develop at least four new-generation reactors there, the utility said in a statement yesterday.

``I want a partnership in the U.S. and I won't rule out any option,'' EDF Chief Executive Officer Pierre Gadonneix said last week in an interview in Paris. ``I think in the U.S. you have to have an American partner. It's not the law that says this, it's my conviction.''

EDF, which is targeting four nations for nuclear energy investment, last month agreed to pay 12.5 billion pounds ($22 billion) to buy British Energy Group Plc.

The utility is developing a 1,600-megawatt EPR in Flamanville, France and plans four in the U.K. It has also made the U.S., China and South Africa as priority markets for atomic expansion.

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