France strengthens profile in South Africa with GDF Suez deal

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22 October 2013, Electricity, Nuclear, Solar, Wind

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The French government is known for its proactive attitude when it comes to securing major industrial contracts for its national champions. For example, in June 2013 Airbus won a contract for 31 planes with Japan Airlines following President Hollande's visit to the country. His two-day visit to South Africa in October 2013 has confirmed the success of this strategy, with GDF Suez and Alstom taking away contracts worth EUR1.5bn and EUR4bn respectively. GDF Suez will build new conventional thermal electricity capacity in the country, while Alstom will supply 3,500 train wagons to Prasa, the national transport agency.

These contracts are lucrative, but more importantly they set France up as the leading choice for future infrastructure contracts in solar energy, nuclear power, and transport. This represents a huge opportunity, as according to Datamonitor's Power Analyzer Dashboard (EN00038-041) South Africa's electricity demand is forecast to double in the next 15 years, and up to 9.6GW of nuclear generation capacity is expected to be required by 2030.

The South African government is committed to nuclear generation forming part of its future energy mix. State-owned utility Eskom previously launched a public tender for new nuclear capacity, but suspended it in 2008 due to a lack of capital. French nuclear giant Areva will almost certainly respond to the next expected tender in 2014 for six new nuclear reactors, and thanks to France's historical reputation for expertise in nuclear generation (French-owned Framatome built the country's first nuclear plant in the 1980s) Areva will certainly be a strong contender.

France's proactive strategy is paying off. As part of the deal the French Development Agency agreed to a EUR100m loan to South African utility Eskom to develop solar energy projects. The success of GDF Suez and the possible advantage it opens up for French nuclear is certainly worth the outlay - as long as the projects go to plan. With the recent step closer to a final decision on EDF's GBP16bn investment at Hinkley Point in the UK - and the confirmation of 35-year government support under the Contracts for Difference scheme - France's nuclear influence abroad is firmly on the rise.

Source: MarketLine

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