Benjamin Tait runs Prospex Research Ltd, a London-based consultancy specializing in analysis of strategic and financial issues for the international power business

Siemens has looked to European nuclear power’s future and decided that it is French. The German group’s nuclear power equipment arm is to be merged with Framatome of France, leaving Siemens with a stake of 34 per cent in the new group and French entities with the rest. When the news was announced in early December, the stock market cheered what it saw as being yet another decisive and vital move by Siemens, which is pushing unit after unit into a partnership or a sale if it cannot achieve global scale and punch on its own. That favourite analyst epithet, “sprawling conglomerate”, may still apply, but Siemens shares have doubled over just one year of management hyperactivity. Where there is sprawl, there is also hidden value.

French motives and views are not so easily measured, even if they are more obvious. No share price graph will tell you how hot or how hopeless French nuclear power is. Framatome is not listed. Neither is Cogema, the state-owned fuel supplier which recently took a 34 per cent stake in Framatome from listed Alcatel, further insulating the French nuclear sector from the markets. The equipment and fuel groups’ most important customer, EDF, is not only state-owned, but is also assured of a defined and protected public service role, even in market-mad Europe. If the European nuclear future is French, then let’s hope that the country’s famous academic system produces enough intelligent civil servants to handle the state-market balancing act well. The French record is much more mixed than either the graduates of ENA, the elite academy for civil servants, or the wild bash-the-frogs crowd here in London would care to admit. But you can only leap over an abyss like the state-market conflict so many times before you start pushing your luck, especially when the abyss is now as big as the globe itself.

It must be noted that the future is not just French and political, officially anyway. Siemens insists that it is still committed to the nuclear business, and that the merger is about making essential cost savings in a difficult market. But, appropriately enough, the axe will reportedly fall much more heavily at both companies’ US operations than it will in either France or Germany. Furthermore, despite all protestations to the contrary, how can the move escape being interpreted as a final admission of nuclear defeat in greenish Germany? Siemens and Framatome had hoped to supply a whole new generation of Franco-German reactors. But nowadays, any talk of new German orders sounds like pure fantasy, no matter how long that the existing reactors will be allowed to run. France can better endure the pressures of nuclear business in a hostile market, and its endurance depends above all else on political determination.

Finally, France is considering a flotation of Framatome within a couple of years, which would allow Alcatel to dump its remaining stake of under 10 per cent. But will this flotation really happen? If it does happen, then how much influence will the market have? If smaller French banks are worth protecting from harmless investors such as the Dutch (the latest protectionist folly), then it will presumably be a very, very long time indeed before the sensitive French nuclear sector is properly exposed to a real market test. This is too bad when the sector’s friends and enemies alike might find such a test to be surprisingly useful or justly chastening.

America Discovers Spain Forget the tired coverage of the Spanish corporate conquistadores snapping up Latin American energy assets faster than their ancestors grabbed up land and gold. The real Spanish action at the moment is at home in Europe. And the appropriate cliche is that of Columbus in reverse, with the Americans, sorry, the US, discovering a rich new world that it had previously long dismissed as being mythical and fanciful, in money terms at least.

No less a money-maker than Morgan Stanley Dean Witter (MSDW), a top New York investment bank, is the latest to have recognised just what an important player Spain has become. Just before Christmas, MSDW announced the creation of a European power trading joint venture with Endesa, Spain’s leading utility (and the fifth largest utility in Europe by power sales). Endesa and MSDW will offer “structured” trading products, such as options and customised contracts indexed to reference prices, to multinationals looking to secure international supply deals. The strategy will be “asset-backed”, in keeping with the safer and harder-hitting trading model that many of the US players have come to prefer. Any Endesa acquisitions in Europe – and there may be some very big ones – should be part and parcel of the trading venture, not separate operations.

London will be the joint venture’s home to start with, and hopefully will be its permanent base. The capital of capital is the ideal base for European dealmaking. For evidence of this, look to the international deal factory MSDW has built up in the Canary Wharf district. Having toiled in its research engine room, your correspondent would advise any doubters of MSDW’s commitment and potency to take out some insurance. The whole business has the surreal feel of any competitive financial operation – what are we trading now, does anybody really know? Egos can be even more over-inflated than envious chroniclers might imagine. Things can go very badly wrong in seconds, leaving a supposedly sleek and dignified banking team to frantically pick up the pieces as fast as it can, and hopefully before the market notices. Fine, make as much fun of the crazy Yankee model as you want. However, the results – bumper profits and a string of displaced European investment banking champions – speak for themselves.

As for Endesa, the same warnings apply. Some people see a predictable privatised utility business, cosseted at home and moving – unimaginatively and at great expense – into Latin America. There is some truth to both of these characterisations. But not much. Only a fool in Endesa’s sights could look through what the company has been up to recently and think he had nothing to worry about. Competition of a sort has emerged in Spain, and Endesa is accelerating cost-cutting plans to deal with it. In northern Europe, it has taken 10 per cent stakes in the Amsterdam Power Exchange and the Polish power exchange project to position itself for the European trading game. The MSDW link is an intriguing new part of its bid to provide European services, which looked a little over-ambitious a few months ago. So two cheers for the conquistadores of Madrid and New York alike. Outside Spain, they deserve every nugget of European gold they can get their hands on.