EDF Beats GDF Suez to Build New Reactor in France

By Tara Patel

Jan. 30 (Bloomberg) -- Electricite de France SA, Europe’s biggest power producer, beat off competition from GDF Suez SA to win French government approval to spearhead development of a second new-generation atomic reactor.

The Evolutionary Power Reactor, or EPR, will be built at an existing nuclear site at Penly, northern France, starting in 2012, President Nicolas Sarkozy said in a statement. Paris-based EDF will have majority control over a company created to oversee the project. GDF Suez “will be associated” with the venture.

The decision ends months of speculation over which utility would pilot the project and where it would be located. EDF is already building a 1,650-megawatt, Areva SA-designed EPR at Flamanville in Normandy at an estimated cost of 4 billion euros ($5.2 billion). It plans similar models in the U.K. and the U.S., and has started developing reactors in China.

“EDF will have to put cash down to invest,” Chicuong Dang, an analyst at Richelieu Finance in Paris, said today by telephone. “Earnings will come over the longer term. Costs of building the EPR have risen while French power rates remain low.”

Construction of a second EPR, targeted for completion in 2017, has been condemned by some environmental groups as unnecessary.

‘No Justification’

“It has no justification other than to provide a massive contract to the state-owned nuclear industry,” Greenpeace said in a statement. “No other options such as energy efficiency or renewable-energy potential have been considered.”

EDF dropped as much as 65 cents, or 1.7 percent, to 38.31 euros in Paris trading, and was at 38.38 euros as of 1:42 p.m. local time. GDF Suez lost 2.5 percent to 30.07 euros, taking its decline this year to 15 percent.

EDF, which operates 58 atomic plants in France, will join with other investors in the project, “in particular GDF Suez,” the state-controlled utility said today in a separate e-mailed statement. The government left open the possibility of a third new-generation reactor, saying it “acknowledges the willingness of GDF Suez to lead, develop and operate the next EPR.”

GDF Suez and Total SA, Europe’s third-biggest oil company, have said they will collaborate on the Penly reactor. Their commitment to cooperate on the project follows their existing partnership with Areva to develop a plant in Abu Dhabi.

Third EPR

GDF Suez will be “a candidate” to pilot a third EPR in France, Vice Chairman Jean-Francois Cirelli said today in an interview on France24.

The utility operates seven reactors in Belgium through its Electrabel SA unit. The European Commission has put pressure on the French government to increase competition on the national power market, now dominated by former monopoly holder EDF.

EDF signed a deal with Enel SpA in 2007, giving Italy’s largest utility a 12.5 percent stake in the Flamanville generator and an option to invest in five more plants in France. EDF has said it’s keen to expand nuclear operations in Italy, China, the U.K. and the U.S.

GDF Suez has agreements to use power from two of EDF’s French reactors, at Tricastin and Chooz. GDF Suez Chief Executive Officer Gerard Mestrallet has said he wants to operate EPRs by 2020 and that France is “obviously a priority.”

French power exports exceeded imports by 46.6 terawatt-hours last year, 15 percent less than in 2007, according to Reseau de Transport d’Electricite, EDF’s wholly owned grid operator. The utility has to rely on imports to meet peak demand during hot or cold spells.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net