Total nuclear plans: a long-term solution to the Suez connundrum?

Implications: Total’s incoming CEO has declared his company’s intention to enter the nuclear electricity business. Given France’s wealth of nuclear expertise, Total seems better positioned than many other oil companies to acquire this new competence.  

Yet, Total may be tempted to buy, as opposed to build up internally, the array of skills required; though this may seem a long shot, an eventual purchase of Suez, [whose subsidiary Tractebel has been in the nuclear industry for over 30 years and produces 5800 MWe in four nuclear plants] would with one stroke bring Total the required know-how.

Analysis: Given the hurdles major oil companies face in augmenting oil production, branching out into new business is quite rational. Appealing though renewables may be, nuclear energy is a much more promising field in the medium term. New design "Generation III" nuclear plants are inherently safer, simpler, cheaper and quicker to build than their predecessors, and they burn less fuel and produce less waste. Even taking into account decommissioning costs, nuclear energy is cheaper than almost any other alternative. Indeed, some 24 new reactors are now being built worldwide, mostly in Asia and eastern Europe. A further 41 are planned or on order, and another 113 are under consideration. In total, this would equal 40 per cent of the world's present nuclear capacity.

Total’s move will likely be supported by most in the nuclear field (AREVA as a supplier; the CEA & their very powerful network of ‘hauts fonctionnaires,’ as their influence will grow), as well as by the energy regulator and the ministry of industry in general. By contrast, EDF will probably agitate against the arrival of a powerful new competitor.

Given the wealth of nuclear expertise available in France and the plentiful supply of competent scientists & engineers from France’s ‘grandes écoles,’ Total seems better positioned than many other oil companies to obtain the vast array of skills required to become a credible actor in such a complex, high-tech field.

However, it would be much faster for Total to purchase these skills, as opposed to building them up piece by piece. One neat way to proceed would be at some point to purchase Suez, which has been in the nuclear industry for over 30 years and currently produces 5800 MWe in four nuclear plants. The expertise of various Suez subsidiaries (AXIMA, COYNE & BELLIER, TRACTEBEL ENGINEERING, ELECTRABLEL, ENDEL, FABRICOM GTI, INEO, SITA, TECNUBLEL) would at one stroke bring Total the required know-how.

Should Ms. Royal win the forthcoming French presidential elections and implement her promise to prevent the GdF/Suez merger in order to merge GdF with EdF (something the EC would not countenance without majors divestments), then the French authorities would probably actively back a Total bid for Suez, as a means to reinforce France’s dominance of the civilian nuclear energy industry.