EDF's Proglio Takes Mestrallet Water Fight Nuclear as French Sell Reactor
Henri Proglio and Gerard Mestrallet, the Frenchmen who run the world’s biggest utilities, fought for a decade to win water contracts around the world. Now, the rivalry goes nuclear.
Proglio took the helm at state-controlled Electricite de France SA in November, charged with spearheading the nuclear power producer’s push into Asia and North America as France bids to build reactors overseas. At GDF Suez SA, an energy and water group built on France’s former natural-gas monopoly, Mestrallet wants to promote a reactor design that may compete with his larger rival.
At stake is France’s ambition to turn its expertise as the world’s largest producer of nuclear power after the U.S. into export revenue as governments around the world build atomic plants to cut reliance on fossil fuels.
Before EDF, Proglio, 60, ran water company Veolia Environnement SA, where he battled Mestrallet’s Suez Environnement for contracts from Australia to Saudi Arabia.
“They waged war for contracts all over the world and succeeded in prospering without destroying each other,” said French lawmaker Francois-Michel Gonnot, who’s chairman of the country’s nuclear waste agency. “This competition is not necessarily negative for EDF and GDF Suez. If they can do the same thing in the nuclear sector, it’s not a bad thing.”
France’s failure to win a $20 billion nuclear contract in the United Arab Emirates in December shows success isn’t guaranteed.
The companies, along with state-controlled Areva SA, the world’s biggest reactor builder, were criticized by French President Nicolas Sarkozy for poor co-ordination after their joint bid lost out to a group led by Korea Electric Power Co. A government inquiry into the nuclear industry is looking at what went wrong.
“There are big problems in the way the French nuclear industry is organized,” said Maxime Sapin, a fund manager at Cholet-Dupont Gestion SA. “France must avoid a situation where the different national companies compete against each other and are penalized abroad.”
In an interview with Le Figaro magazine last month, Sarkozy warned the chief executives involved in the failed U.A.E. bid against “counter-productive” competition.
The French government wants EDF, the world’s biggest operator of nuclear reactors in which it has an 84 percent stake, to team up with GDF Suez and Areva in different combinations for international projects such as a nuclear contract coming up in Jordan. Prime Minister Francois Fillon has dubbed this approach “Team France” and said the state will lead the campaign to win contracts. The government has a 35.6 percent stake and golden share in GDF Suez.
EDF head of communications Bernard Sananes didn’t respond to a request for a comment for this story. GDF Suez spokesman Jerome Chambin said Mestrallet wouldn’t comment.
Mestrallet, 61, and Proglio locked horns before when they led water companies that controlled distribution on opposite sides of the Seine River that divides the French capital.
While at Veolia, Proglio had wanted to buy parts of Suez Environnement at the same time Mestrallet was fighting to keep control of the company as he completed a merger with Gaz de France.
Proglio, who declines to be included in the French version of Who’s Who, is the son of vegetable sellers from Antibes. He worked his way up through the ranks at Veolia after studying at the elite French business school HEC with his twin brother Rene, who is chairman of Morgan Stanley in France.
Mestrallet, who has an entry in Who’s Who, is a Parisian by birth whose parents ran a stationery business. An avid horse- jumper, his wife has a stud farm at their property in Normandy. He has spent more than two decades at the Suez group, whose major shareholder is Belgian billionaire Albert Frere, learning Flemish and developing a taste for local beer.
Efforts to put up a united front may be complicated by Mestrallet’s potential sponsorship of a nuclear reactor design that differs from the 1,650-megawatt EPR model that Proglio is developing in France and China and has slated for projects in the U.K., U.S. and Italy.
Mestrallet wants to promote the 1,100-megawatt Atmea reactor, designed by Areva and Mitsubishi Heavy Industries Ltd.
The Atmea, marketed by Areva since the start of the year, means France now has two reactor models on offer, which nuclear executives have said will increase the country’s chances of winning contracts abroad.
As many as 539 reactors are either under construction, planned or proposed in the next 15 years, according to the World Nuclear Association. Billions of dollars of investment will be required, with the cost of EDF’s new-generation reactor at Flamanville in Normandy estimated at 4 billion euros ($5.3 billion) by the company.
GDF Suez, which operates seven nuclear reactors in Belgium, wants to operate as many as four new-generation atomic plants by 2020. Its expansion plans in France, where EDF operates 58 reactors, have been thwarted by opposition from trade unions.
The government report commissioned by Sarkozy will help to “calm tensions,” according to Sapin. “France has to decide whether it wants one nuclear champion, EDF, or two.”
The report by Francois Roussely, a former EDF CEO and now an investment banker at Credit Suisse Group AG, is due this week.
Last year, Sarkozy chose EDF to take charge of the development of the nation’s second EPR at Penly, northern France. GDF Suez and partner Total SA, France’s biggest oil company, were given a 33 percent stake in the project.
Giving GDF Suez control over the development of a nuclear reactor in France would be “counter-productive and even dangerous in the long run,” the Confederation Generale du Travail union, or CGT, wrote in a report last month. The public ownership of EDF is the driving force behind the acceptance of atomic power in France, it said.
The first test of France’s efforts to persuade its nuclear champions to work together may come in Jordan.
The Middle Eastern kingdom will select a private investor and technology for its first nuclear reactor within a year, Jordan Atomic Energy Commission Chairman Khalid Touqan said last month.
To contact the reporter on this story: Tara Patel in Paris at firstname.lastname@example.org