Areva NP

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Areva NP

Tour Areva
Paris La Defense, F-92084
France
Telephone: (33 1) 47 96 00 00
Fax: (33 1) 47 96 36 36
Web site: http://www.areva-np.com

Joint Venture (34% Owned by Siemens AG)
Incorporated: 1958 as Société Franco-Américaine de Constructions Atomiques (Framatome)
Employees: 14,362
Sales: EUR 2.90 billion ($3.43 billion) (2005)
NAIC: 236210 Industrial Building Construction; 237990 Other Heavy and Civil Engineering Construction; 325188 All Other Inorganic Chemical Manufacturing; 332313 Plate Work Manufacturing; 332410 Power Boiler and Heat Exchanger Manufacturing; 333298 All Other Industrial Machinery Manufacturing; 334513 Instruments and Related Product Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 334519 Other Measuring and Controlling Device Manufacturing; 451310 Architectural Services; 541330 Engineering Services; 541420 Industrial Design Services; 541690 Other Scientific and Technical Consulting Services; 561210 Facilities Support Services; 811310 Commercial and Industrial Machinery and Equipment (Except Automotive and Electronic) Repair and Maintenance

AREVA NP, formerly Framatome ANP, is the world's leading manufacturer of nuclear power plants. It is part of France's AREVA Group, the only fully vertically integrated nuclear power business outside of Russia. Beyond designing and constructing nuclear power islands, AREVA NP provides a full spectrum of nuclear power services, including maintenance, inspection, and upgrading services for utilities operating its own and third-party nuclear plants; manufacture of nuclear components for power plant construction and maintenance; and the design, fabrication, marketing, and sale of nuclear fuel assemblies. The company responded to the worldwide slowdown in the nuclear power market in the 1980s and 1990s by diversifying into other areas of manufacturing, although it divested its Framatome Connectors International business in 2005. AREVA NP was formed in 2001 as Framatome ANP, a combination of Framatome SA and the nuclear business of Germany's Siemens AG industrial group. The French government then folded Framatome ANP in with several other state-owned nuclear-related businesses to create the AREVA Group, which owns 66 percent of AREVA NP. Siemens owns the other 34 percent. France depends on AREVA-built reactors for three-quarters of its electricity. Other important markets include Germany and China. In 2003, AREVA announced Finnish utility TVO (Teollisuuden Voima Oy) would be the first client for the third-generation EPR (European pressurized water reactor) it had been developing with Siemens. It was also part of a venture to build a new reactor in the United States.

BUILDING THE NUCLEAR SOCIETY

When the world turned toward peacetime use of the newly emerging nuclear technology after World War II, France, with limited natural fuel resources of its own, determined to develop its own nuclear reactor program as a means for preserving its independence. By 1955, the country, in a joint effort with England, had debuted a reactor technology that could rival that developed by Westinghouse in the United States. Although there were as many as 12 competing technologies, an atomic summit among European countries confirmed the French-English GCR (gas-cooled reactor) and the American PWR (pressurized water reactor) as the two most viable technologies. Both types of reactors were already in operation. The GCR offered the French the independence they sought, as that technology made use of natural uranium, rather than the enriched uranium of the American system. The process of enriching uranium for use in nuclear reactors was too expensive for the postwar European economy. While the Americans offered to supply enriched uranium for European reactor use, the French government, jealous of its independence, appeared to lean toward authorizing GCR as the "national" nuclear reactor technology. Spurring this preference was the crisis in the Suez of 1956, an event that helped expose the French dependence on foreign-supplied fuel resources. The first three reactors built in France were of the GCR type.

In Belgium, however, PWR reactors were preferred. In the late 1950s, the Belgians sought bids for building their first full-scale nuclear reactor, eventually called Chooz 1, to be built in the Ardennes region near the French-Belgian border. Although the French government, through the CEA (the French atomic energy commission), favored the GCR technology, a group of French engineers saw an opportunity to pursue the PWR technology and to compete for the Belgian reactor contract. In 1958, several companies of French industrial giant the Schneider Group joined with Empain, Merlin Gérin, and the American Westinghouse to license Westinghouse's PWR technology and develop a bid for Chooz 1. Called Franco-Américaine de Constructions Atomiques, the new company flew in the face of the rising anti-Americanism of the rebuilding French society. The original mission of the company, which consisted of four engineers, one each from each of the parent companies, was to act as a nuclear engineering firm and to develop a nuclear power plant that was to be identical to Westinghouse's existing product specifications. The first European plant of Westinghouse design was by then under construction in Italy.

Meanwhile, the EDF (the French government-owned electric utility), in opposition to the CEA, maintained an interest in PWR technology. The Chooz contract offered the EDF, which joined with the Belgian electric utilities to call for the Chooz bids, the opportunity to explore PWR without offending the French national pride in its homegrown GCR technology. By the beginning of 1960, only two bids remained in contention; in the middle of the year, Framatome received informal permission to begin the design work on the Chooz reactor. A formal contract was signed in September 1961 for Framatome to deliver a "turnkey" system to include not only the reactor, but an entire, ready-to-use system of piping, cabling, supports, and other auxiliary systems, propelling Framatome from a nuclear engineering firm to an industrial contractor.

Through the 1960s, Framatome worked very much as a Westinghouse protégé, and development of the Chooz plant was restricted to Westinghouse requirements. The Chooz 1 reactor went critical in October 1966 and was attached to the French electric system in April of the following year. Several months later, a deformation in the reactor core's internal thermal shield, which had begun to break apart, caused the reactor to be shut down. The unprecedented nature of the repair work that needed to be performed, however, placed Westinghouse and Framatome on equal footing. This development was seen as an integral part in the creation of a true French nuclear technology. From this point, Framatome, aided by the French nuclear and electric agencies, began to "franconize" the Westinghouse technology. Chooz 1 went back on line after two years of repair work and continued to operate without incident until 1993, when it was shut down.

COMPANY PERSPECTIVES

AREVA brings expertise and technologies for better living to meet the challenges of the 21st century: generalized access to energy and information, preservation of the planet, and responsible stewardship of resources for future generations.

In the meantime, the French government appeared to have decided on GCR as the national nuclear technology. Much of the Framatome team returned to their parent companies. A break for the company came in 1966, with a report from leading members of both the EDF and the CEA recommending that France continue to pursue an interest in PWR technology. Then, in 1969, Framatome won its second nuclear plant contract, again from a French-Belgian cooperative agreement, to build the Tihange 1 plant in Belgium. Tihange not only breathed new life into Framatome, it also allowed the company to begin diverging from Westinghouse specifications with its own improvements on the design. By 1969, the company received a new boost: the French military had successfully built a uranium enriching plant, freeing the light water reactor technology from dependence on U.S. or Soviet Union supplies of the material. GCR faded from the French focus. Two competing light water reactor technologies remained—PWR, used by Framatome, and BWR (boiling water reactor), developed by General Electric and promoted by the CGE in France.

The two technologies competed for a contract to build the first Fessenheim plant. CGE had yet to build a light water reactor, while Framatome had not only Chooz, but also Tihange, under its belt. In a meeting with CGE, Framatome's chief executive, Maurice Aragou, warned of the high cost associated with building the Chooz reactor. CGE took his advice to heart and submitted a bid of FRF 360 million for the Fessenheim reactor. Framatome, however, was able to base its bid on its costs of building Tihange (at the same time the company was able to extrapolate the cost of building a series of reactors) and brought in a bid of only 242 million francs. Framatome won not only the Fessenheim 1 contract, but an option to build Fessenheim 2 as well. The following year, Framatome repeated its success, winning the contracts for two new French reactors, Bugey 1 and 2, as well as the options to build Bugey 3 and 4. Nonetheless, the French government pursued a course of encouraging the development of both light water reactor technologies.

BENEFITING FROM THE OIL CRISIS OF 1973

The French economy boomed during the 1960s, and with it, the national energy demand soared. Petroleum and coal continued to be the focus of the country's energy supply, despite the French dependence on foreign suppliers; 76 percent of the country's oil, gas, and coal supplies were imported. The oil crisis of 1973, however, forced France to revise its energy policy entirely. Weeks after the OPEC decision to raise the price of oil, the French government directed the EDF to step up its nuclear plant construction, with a goal of achieving a 50 percent domestic supply of the country's energy needs. EDF, in turn, adopted a policy of ordering plants on a standardized, series-built, multiyear contract basis, and not one by one as had been the previous policy. Framatome won the first of these contracts, for 16 plants, in 1974. The company's future was not fully assured until the following year, however, when the EDF finally abandoned its policy of encouraging competing nuclear reactor technologies. On August 4, 1975, the nod went to PWR and Framatome.

In 1976, Framatome was awarded the second multi-year contract, this time for ten reactors. This was soon followed by a third contract for eight reactors, which was later extended to include 12 more reactors. In that year, also, Framatome began accepting its first foreign orders. By the end of the decade, the company had become the leader in the worldwide nuclear power plant industry. Many, including parent Westinghouse, expressed doubts that the company could meet the challenge ahead of it. Framatome, however, rose to the occasion. At the beginning of the decade, Framatome numbered only some 200 employees, including only 25 engineers. By 1975, the company's payroll had swelled to 2,000. By 1981, Framatome employed some 5,000; the following year, its engineering staff alone numbered 5,000 employees.

KEY DATES

1958:: Framatome consortium formed to license Westinghouse's PWR nuclear technology.
1967:: Original "Chooz" reactor begins supplying power.
1982:: Westinghouse license expires; Framatome takes over many operations of bankrupt shareholder Creusot-Loire.
1987:: Framatome begins diversification into connectors by investing in Souriau.
1989:: Framatome forms Nuclear Power International venture with Siemens.
1993:: Original "Chooz" reactor is shut down.
2001:: Framatome ANP formed from Framatome SA and Siemens AG's nuclear operations; AREVA Group created.
2005:: Joint venture formed with Constellation Energy to market new technology reactors in the United States; connectors business divested.
2006:: Framatome ANP renamed AREVA NP.

The nuclear power industry hit a bump in 1979 with the accident at Three Mile Island. With U.S. nuclear plant construction slowing down under the Carter administration, new construction orders ground to a halt. Elsewhere in the world, orders for nuclear power plants were being put on hold. The French nuclear power policy remained intact, however, allowing Framatome to continue to thrive. Meanwhile, the company was also gaining its independence from its parents. In 1982, its license contract with Westinghouse expired, allowing Framatome to develop its own in-house specifications for the first time. Then, another Framatome parent, the industrial manufacturing giant Creusot-Loire, went bankrupt. As its largest creditor, Framatome took over much of its former parent's operations, including the mechanical engineering and metalworking businesses of Creusot-Loire and its subsidiaries. A reorganization of Framatome's shareholder base followed, with arch-rival CGE (which was shortly to become known as Alcatel-Alsthom when it was privatized as a public company) taking a major stake in the company.

DIVERSIFYING FOR SURVIVAL

Meanwhile, the global nuclear power plant market was reaching saturation. By the early 1990s, new plant construction orders were expected to dwindle to a handful, and the market's return to health was not expected until the year 2010 at the earliest. In response, Framatome, under the leadership since 1985 of Jean-Claude Leny, who had served as a managing director for the company since the early 1970s, set out to diversify its operations to survive. The first steps toward this diversification had occurred in the 1980s, particularly with the move into mechanical engineering with the Creusot-Loire acquisition. The company had also taken steps toward vertical integration in the nuclear power industry, including supplies and maintenance operations for its own and third-party reactors.

Framatome was determined to look beyond the nuclear energy market for its survival during the industry's coming lean years. In 1988, Framatome saw its chance. When former parent Schneider attempted a takeover of Télémécanique, a French specialist in industrial control components and automated systems, that company approached Framatome as a white knight. Framatome placed a counter bid for the company and reached an agreement to acquire Télémécanique. At the last moment, however, one of Framatome's shareholders, CGE, blocked the acquisition. Télémécanique went to Schneider, and Framatome was forced to look elsewhere for its diversification effort.

The company had taken a step in its eventual direction in 1987 when it had acquired a stake in the connectors business of Souriau. After the failure of its Télémécanique bid, Framatome decided to place its diversification strategy fully into the connectors industry. The company acquired full control of Souriau, as well as two other French connectors companies, Burndy and Jupiter, and in 1989 formed its Framatome Connectors International (FCI) subsidiary. FCI continued to expand into the 1990s, acquiring Schmid in 1991, and Daut + Rietz and Connectors Pontarlier in 1993, as well as taking control of Burndy Japan and OEN Connectors in 1992. By the mid-1990s, FCI had grown to become the largest European connectors supplier and the third largest in the world. The move was not without its difficulties; the prolonged European recession of the 1990s caused a drop in the connectors market overall. Nevertheless, the boom in the computer, networking, and telecommunications industries in the mid-1990s would help FCI overcome the difficulties of its early years.

Meanwhile, Leny and Framatome had found their revenge on CGE, now known as Alcatel-Alsthom and shortly to become aligned with the British GEC. Knowing that Alcatel-Alsthom and Siemens were bitter competitors, Framatome entered negotiations with Germany's Siemens to form Nuclear Power International in 1989 to develop the next generation nuclear reactor technology, the European pressurized water reactor (EPR). The alliance not only placed Framatome in direct competition with the British-French alliance, it also placed the company in opposition with its largest shareholder: Alcatel-Alsthom held 44 percent of Framatome.

Alcatel-Alsthom struck back the following year, when it received authorization from the French government to increase its position in Framatome to 52 percent; however, Alcatel-Alsthom was forced to back down, selling 8 percent of its Framatome stock to Credit Lyonnaise, the CEA, and to Framatome management. Alcatel-Alsthom's next attempt against Framatome came in 1994, when the French government, under Edouard Balladur, decided to privatize Framatome and give the government's controlling share of the company to Alcatel-Alsthom. This action fell through, but two years later, Alcatel-Alsthom, through its GEC-Alsthom alliance, struck again, proposing a fusion of Framatome with GEC-Alsthom. The merger nearly went through, but foundered as both the French government and GEC-Alsthom insisted on retaining 51 percent of the merged corporation. Leny retired as Framatome's chief executive in December 1996. He was replaced by Dominique Vignon as chairman and CEO. A future union between Framatome and Alcatel-Alsthom remained a possibility.

Meanwhile, contracts to build nuclear power plants in China helped spike Framatome's revenues to nearly FRF 20 billion in 1994. With no new reactor contracts on the table in 1995, however, sales slipped back to FRF 17.9 billion. The company's corporate share of net income had also slipped, from FRF 863 million in 1993 to FRF 663 million in 1995. The revitalization of the French economy, and the worldwide boom in the international connectors market, as Framatome entered the remaining years of the 20th century appeared to confirm the company's diversification for survival strategy. Framatome appeared healthy and able to maintain its nuclear power leadership position in preparation for the next wave of reactor construction expected in the early years of the next century.

RESTRUCTURING FOR THE NEW MILLENNIUM

The extensive network of transnational joint ventures and alliances continued to evolve as the countries and companies involved vied for strategic positions in the world's future energy market. Framatome's partner in research for the next generation of EPR, Siemens AG, raised eyebrows in late 1997 when it emerged that the German industrial group was discussing the possibility of merging its nuclear business with that of British Nuclear Fuels (BNFL). In the end, however, Siemens dropped the deal as BNFL pursued its acquisition of Westinghouse.

A comprehensive restructuring of France's atomic energy industry ensued. In January 2001 Framatome's nuclear business merged with that of Siemens AG to form Framatome ANP (Advanced Nuclear Power). Framatome was the dominant shareholder, with a 66 percent stake. A couple of years earlier, Alcatel had sold most of its shares in Framatome to COGEMA, France's state-owned nuclear fuel reprocessing company.

Another large merger followed later in the year. In September 2001, a handful of state-controlled entities—Framatome ANP, FCI, CEA, and COGEMA—were combined into the AREVA Group (legally known as Société des Participations du Commissariat à l'Energie Atomique, or CEA). This was a massive enterprise, employing 45,000 people. Its CEO was Anne Lauvergeon, former head of COGEMA and at one time an operative in the Mitterrand administration. A small number (4 percent) of shares were offered to the public; the French government owned almost all of the remaining stock.

INTERNATIONAL EXPANSION

France counted on AREVA's reactors to supply three-quarters of its electricity. As war embroiled the world's oil producing regions, nuclear power found renewed appeal outside the country. With virtually no carbon dioxide emissions, it was even accepted by some environmentalists concerned about global warming.

Framatome was uniquely poised to benefit from the new atmosphere. The parent AREVA Group was the most vertically integrated nuclear operation in the West. Since the Americans had let their uranium processing technology stagnate after Three Mile Island, AREVA's only full-spectrum rival was Russia's Minatom, the company behind Chernobyl, noted Fortune magazine.

In 2003, AREVA announced Finnish utility TVO (Teollisuuden Voima Oy) would be the first client for the EPR, representing the third generation of reactor technology. In this project, Framatome NP had responsibility for the nuclear part of the plant, while Siemens would supply the systems for producing electricity. Electricité de France soon signed up for its own series of EPR plants to be built beginning in 2007.

By 2000, the U.S. Nuclear Regulatory Commission had begun to renew licenses for the country's original postwar crop of reactors, adding 20 years to their original 40-year terms. AREVA had a leading position in the United States for replacement parts, edging out GE and Westinghouse Co. In 2002, AREVA acquired North Carolina's Duke Engineering & Services, Inc.

The stereotypical pattern for American industry had been to perfect ideas invented elsewhere. However, the Europeans appeared to have taken the technological edge after the United States went for 25 years without building any new reactors. In 2005 U.S. utility Constellation Energy formed a joint venture with AREVA to prepare to market Framatome's EPR design in the United States. Two years later, this became part of a new venture with French utility Electricité de France (EDF) to build a nuclear plant in Maryland next to two existing reactors. This would be the first reactor built by a foreign company in the United States.

China had become one of AREVA's most important venues during the years when most western nations lost interest in nuclear power. China's explosive growth in manufacturing was accompanied by voracious energy demands. AREVA NP had been active in China since the 1980s and had technology transfer agreements with several companies there.

As it renewed its focus on nuclear power, AREVA divested the connectors business in 2005, selling it to Bain Capital. FCI had become the world's second largest connectors supplier after buying Berg Electronics of the United States several years earlier. In another 2005 transaction, AREVA enhanced its nuclear business with the addition of Uddcomb Engineering AB of Sweden. AREVA NP posted revenues of EUR 3 billion for the year, compared to a total of more than EUR 10 billion for the parent AREVA Group.

NEW NAME IN 2006

The names of AREVA's principal subsidiaries were restyled in March 2006. Framatome ANP became AREVA NP, while COGEMA was renamed AREVA NC. An electricity transmission and distribution unit acquired from Alstom in 2004 was operating as AREVA T&D. In 2007, the parent company, technically "Société des Participations du Commissariat à l'Energie Atomique" (CEA), planned to change its legal name to match its trade name, "AREVA."

M. L. Cohen

Updated, Frederick C. Ingram