(FORTUNE Magazine) – Dangling from the claws of a remote-controlled robot, the spent nuclear fuel rods look strangely impotent. Only the heat waves shimmering around the metal tubes give any clue to the radioactivity inside. During its four-year life span, the enriched uranium inside the tubes generated enough power to supply the annual electricity needs of a town of 10,000 people. Or, put in the wrong hands, it could have helped make a bomb to kill them.

At La Hague, the world's biggest nuclear reprocessing facility, every possible precaution is taken to ensure that never happens. On this spring morning French soldiers are tramping round the 750-acre compound on the Normandy coast checking for intruders. Three round-the-clock surveillance networks are in operation, beaming live feeds to the nuclear regulatory agencies of the UN, the European Union, and France. An alarm system is set to go off at the merest trace of excess radioactivity. "We consider ourselves the most monitored nuclear site in the world," says Eric Blanc, director of operations at La Hague for Areva, the French state-owned company that runs the facility.

For the past quarter century, that kind of sales pitch has failed to quell the fears of most people about nuclear power. The partial nuclear meltdown at the Three Mile Island power plant in Pennsylvania in 1979 drastically curtailed reactor building in the U.S. Seven years later the Chernobyl disaster turned public opinion in Western European countries outside France against nuclear power. As a result, nuclear power's share of global electricity production, which shot up from 2% in 1970 to 16% in 1988, has been stuck at that level ever since.

But Areva believes that nuclear power is poised to make a comeback. "You can't have a solution to growing global energy demands without nuclear power," says Anne Lauvergeon, Areva's 44-year-old chief executive. Coming from the French, it's easy to dismiss such remarks as special pleading. After all, France--a country with no major petroleum reserves--has made the world's biggest bet on nuclear power. In 1974, in response to the oil crisis, the government concluded that France's scientific and engineering expertise meant nuclear power was the best route to energy self-sufficiency. In true Gaullist fashion, the government launched a reactor-building program with little consultation. Today France derives 75% of its energy from nuclear power, far more than any country other than Lithuania. Whether that proves that France's nuclear gamble has paid off depends on your vantage point. Supporters of nuclear power say that France, the world's largest net exporter of electricity, also has Western Europe's cheapest retail electricity prices. Opponents maintain that the dangers associated with enriched uranium and its byproduct, plutonium, far outweigh any presumed economic benefits.

What's clear, however, is that France's championing of nuclear power is no longer exceptional. For the first time since Chernobyl, a growing number of governments around the world are making the case for more reactors. Two years ago the Bush administration, concerned about dependence on Middle East oil, launched a campaign to prod U.S. utilities to build a new generation of reactors by the end of the decade. Despite the financial risks, chances are the initiative will bear fruit. Last month a consortium of U.S. utilities and nuclear power companies, led by GE and Westinghouse (a subsidiary of British Nuclear Fuels), presented a proposal to the Department of Energy to share the estimated $800 million cost of developing a new reactor.

Meanwhile, U.S. nuclear regulators have begun extending the 40-year operating licenses of existing reactors, originally awarded in the 1970s and 1980s, for another 20 years. That's good news for GE's nuclear division, Areva's main competitor in the U.S. market for replacement reactor parts. But it is even better news for Areva, which leads the U.S. market. Since reactor licenses began to be renewed in 2000, Areva has grabbed 40% of American steam generator sales and 50% of reactor vessel sales.

Areva's winning streak in the American market doesn't end there. Last June, with relations between France and the U.S. in a tailspin over Iraq, Energy Secretary Spencer Abraham made a surprise visit to La Hague to inspect Areva's reprocessing operation. Call it nuclear realpolitik. Since 1977, when President Carter banned commercial recycling of nuclear fuel, the U.S. has had no reprocessing expertise. The Bush administration wants to explore this option again, and Areva is one of only two Western companies (the other is British Nuclear Fuels) that offers this service. Areva is already doing reprocessing business with the U.S.: Later this year it will receive a test sample of weapons-grade plutonium from the U.S., which it will convert into less fissionable nuclear fuel at its plant near Avignon. If the test is a success, Duke Energy will convert 34 tons of military-grade U.S. plutonium at a plant near Charlotte, N.C., using Areva technology.

The importance of the U.S. to Areva is reflected in its financial statements, which showed a 62% increase in net profit last year to $467 million, on total sales of $9.9 billion. The U.S. now accounts for 19% of Areva's revenue from nuclear energy. (The company also has an electricity-connectors division that accounts for 16% of sales.) But other nuclear markets around the world look equally promising. Areva won a contract last year to build a new reactor in Finland, the first outside France since Chernobyl. And the Japanese, the Chinese, and the South Koreans, all heavy oil importers, are committed to building new reactors. All told, it's likely that the world's current network of 440 operational reactors will pass the 500 mark in ten years.

The nuclear revival is being fueled by some stark projections about the world's future energy needs. The OECD's International Energy Agency estimates that worldwide demand for electricity will double by 2030. Advocates of nuclear power argue that it cannot be excluded from strategies to cope with the surge because traditional fossil fuels and renewable energy sources (sun and wind) can't possibly meet the demand. That argument, disputed by some, is especially relevant in the electricity-guzzling West, where nuclear energy already accounts for 20% of America's annual electricity output and 35% of the EU's total power generation. There are, of course, some hurdles to overcome, such as the steep cost of building new reactors. "Right now the economics of nuclear power in most markets aren't favorable compared with other options," says Peter Fraser, a nuclear energy expert at the International Energy Agency. But that's a risk a growing number of countries seem prepared to take, as they pursue the Holy Grail of energy self-sufficiency.

The risks aren't just financial. "If you spend huge amounts of capital on nuclear power, it means there is no money left to invest in renewable energy sources like wind," says Yannick Rousselet, head of antinuclear activities for Greenpeace in France. But the nuclear industry has a riposte to the green lobby. Nuclear power, they say, is also a "green" energy source because it doesn't release the carbon dioxide that contributes to global warming. That view even has a small constituency in the environmental movement. Says Lauvergeon, dubbed "Atomic Anne" by the French press: "It's very difficult for the green movement to be against climate change and also against nuclear energy."

Amid all the sniping, one fact is clear. As the West's only one-stop nuclear energy shop, Areva is in pole position to reap the rewards from the nuclear comeback. It claims 22% of the world's uranium-mining market, 35% of its fuel-production market, 20% of all reactor construction and service sales, and almost two-thirds of the nuclear reprocessing and waste business. While Areva counts rivals in all its business sectors, such as General Electric in reactors and British Nuclear Fuels in reprocessing, only Russia's Minatom covers the nuclear waterfront. But as the folks responsible for Chernobyl, Minatom has a serious image problem in the West.

So a bet on Areva is essentially a bet on the nuclear industry's future. And it's a gamble that investors believe is worth making. Since September 2001 about 4% of Areva's stock has been traded on the Paris stock exchange in the form of nonvoting investment certificates, with the government holding almost all the rest. In the past year the price of the certificates has risen 37%. Investors on both sides of the Atlantic are waiting for the government to sell up to 50% of Areva in an initial public offering, which they expect before the middle of 2005. In theory, there's nothing to stop the government from selling the entire holding. "It's not a problem for me," says Lauvergeon, who is equally untroubled by the thought that Areva might one day be controlled by foreign shareholders.

All this is a tribute to Lauvergeon's efforts to give Areva the ethos and corporate structure of what she calls a "normal" company. Far harder is the task she has set herself: To win over not just Areva's clients and investment bankers but also fearful consumers who see nuclear power as at best a necessary evil and at worst an apocalyptic disaster in the making. "To develop nuclear energy, we need to have the public's acceptance," says Lauvergeon. That may be an impossible assignment, given the memory of Chernobyl. But if anyone can persuade the public to give nuclear power a second chance, it's Lauvergeon.

Smart, charming, and candid, Lauvergeon breaks the mold of stodgy male bureaucrats and engineers who have traditionally run nuclear power companies. The daughter of a history professor, she graduated from France's elite Ecole des Mines, then made her name in the early 1990s as a highflying civil servant in President Francois Mitterrand's office. In 1995, Lauvergeon became a partner at Lazard bank in Paris, moving in 1997 to French telecom group Alcatel as head of the international division. Two years later she was selected by the government to run Cogema, the state-owned nuclear reprocessing and services business that preceded the creation of Areva.

When she turned up for her first day at Cogema's dismal headquarters outside Paris, the urbane Lauvergeon was shocked by what she found. "It was a bunker," recalls Lauvergeon of the company's introverted, defensive culture. "Some people behaved like little children who say, 'I'm closing my eyes so you can't see me.' " Lauvergeon takes the opposite view of how to conduct a nuclear business. "If we have nothing to hide, we have to explain everything," she remarks. "We have to tell the truth, even if it is sometimes not easy."

To that end, Lauvergeon installed web-linked cameras at La Hague so the public could monitor operations on Cogema's Internet site. (The webcasts were shut down after the Sept. 11, 2001, terrorist attacks.) She commissioned a series of TV ads inviting the public to visit La Hague. And she hammered away at the message that France's nuclear business was safe. "I can say that our security systems are much more elaborate and organized than you find in the chemical industry," she declares.

To bring Cogema's benighted executives out of their bunker, Lauvergeon moved the head office to a gleaming new building in Paris, a few blocks from the Bourse. Behind the scenes, she was also working fast. In 2001 she persuaded the government to merge Cogema with Framatome, France's state-controlled uranium mining and nuclear-engineering firm, and then appoint her to run the new entity, called Areva. As if that wasn't enough to keep her busy, Lauvergeon found time to have two children.

It is an impressive start, but what Lauvergeon hasn't won yet, even in France, is the case for nuclear power as an acceptably safe energy source. The French are commonly regarded by the rest of the world as a nuke-happy people bizarrely proud of the 58 reactors that disfigure their countryside. That perception has some basis in fact, given the unquestioning pride most French people take in their nation's engineering prowess. In the past, French faith in nuclear technology hasn't even been dented by the industry's imperfect safety record.

But although most of these incidents have been trivial, the French have become more ambivalent about nuclear energy. In 2002, for instance, a French poll found that while 59% of respondents thought nuclear energy was the cheapest way to produce power, 62% didn't want nuclear power used in the future.

Some of that ambivalence is evident in Nogent-sur-Seine, a picturesque town of 6,000 people 55 miles southeast of Paris. Nogent is home to a nuclear power station that supplies a third of the annual electricity needs of the French capital and its surrounding region. On the edge of town, two enormous cooling towers loom above the 16th-century summerhouse where the future French king Henri IV entertained his mistress. The towers look sinister, but Francois Brunet, the mayor's spokesman, says that when the reactor was commissioned in 1987, the only protesters came from Paris. "Local people know the technology has been mastered," he says. Nonetheless, Brunet adds, "Some residents have expressed concern since Sept. 11, 2001, about the possibility of terrorists getting into the power station."

Those concerns are shared by Greenpeace, Areva's main adversary in France. In February 2003 a group of Greenpeace activists blockaded a truck carrying 330 pounds of plutonium in Chalon-sur-Saone by chaining themselves to the vehicle at a traffic light. Areva says the plutonium wasn't sufficiently fissionable to make a bomb; Greenpeace begs to differ. "We agree with Areva that the quality of the explosion would not be the best, but we could have made an explosion all the same," says Rousselet, who helped organize the stunt. Lauvergeon condemns the hijacking as irresponsible: "It was extremely hazardous, because it would be easy for a terrorist to say, 'Don't worry, we're only Greenpeace demonstrators.' " She might be right, but her remark contradicts Areva's line that its plutonium transports are safe.

Meanwhile, the French are paralyzed about what to do with their nuclear waste. In the 1970s and 1980s the government selected underground sites for final waste disposal without consulting the local population. But in 1991 rising public concern prompted a law that imposed a 15-year moratorium on any final disposal while the French nuclear industry researched better options. The result can be seen at La Hague, where the accumulated nuclear waste is temporarily stored in 5,500 canisters. "I am confident it's a solvable problem," says Lauvergeon, who is critical of the undemocratic approach to waste disposal taken by her predecessors.

Given the increasingly nervous state of the French public, it's possible the politicians won't make a decision by next year's deadline. Areva won't state publicly its preferred solution. But in private, executives say they favor a "geological" solution. That's nuke-speak for burying the waste deep underground, although Areva is researching better ways to reduce and contain the radioactivity.

Areva has an even tougher job convincing nuclear doubters in Europe, America, and Japan, where there are thriving antinuclear movements. For a start, nuclear energy is not like the auto industry, where one manufacturer's defective car is a rival's market opening; any nuclear disaster contaminates the entire sector. "A nuclear accident anywhere is a nuclear accident everywhere," says Lawrence Scheinman, a professor at the Monterey Institute's Center for Non-Proliferation Studies. At La Hague, that uncomfortable fact was brought home one wet day in May 1986 when, for the first and only time, all the radioactivity alarm systems were triggered in the compound. The rain clouds had been blown thousands of miles west from the stricken Chernobyl reactor.

Areva can't do much about Minatom, the Soviet-era behemoth that still operates Chernobyl-style reactors. Nor, says Lauvergeon, can Areva do much about the spread of nuclear technology, except to refuse to do business with countries not bound by the nonproliferation treaty. Lauvergeon says Areva could sell six nuclear reactors to India tomorrow. "But we have said, 'Sorry, we can't sell to you,' " she says, chopping her hands on her office desk.

That's fine as far as it goes. But Areva has sold four reactors to China, a country suspected of supplying dual-use nuclear technology to Pakistan. China also has one of the world's worst industrial-safety records. Lauvergeon, displaying a French technocrat's faith in bureaucrats and legal documents, maintains that the rules put in place by China's nuclear regulatory authority are stricter than those governing the U.S. industry. As for the Chinese regulator's credentials, she says, "We only sell nuclear plants to countries with a real nuclear safety authority with an adequate degree of independence from the political power." In China, that would be the Communist Party, which has held a monopoly on political power since 1949.

Lauvergeon says that if Western countries closed down their nuclear industries, "it would not change the situation in places like Iran and North Korea." That's debatable, given the enthusiasm of Western nuclear companies to sell their wares to developing countries accused of providing rogue states with technology. Lauvergeon also argues that nuclear power is going to be with us for decades, even if no new plants are built. "Areva can easily exist for a long time to come with the business we get from existing nuclear plants," she says. And since nuclear power can't be wished away, Areva maintains it is preferable for well-run, responsible companies in the developed world to keep standards as high as possible and nurture a new generation of competent technicians.

The force of that point is apparent at Areva's manufacturing plant for reactor replacement parts in Chalon-sur-Saone. At the front entrance, the Stars and Stripes flies proudly next to the French flag--proof that despite the war in Iraq, Americans are the most valued customers here. Since 2000, when U.S. operating licenses began to be extended, a steady stream of American utilities have bought replacement parts worth $420 million.

Business has certainly picked up at Chalon. But Jean-Pierre Durski, the plant's head of operations, shakes his head sadly at the rundown state of the U.S. nuclear industry, 25 years after Three Mile Island. Durski reports that many of his U.S. customers send retired engineers to monitor their orders, because they don't have qualified technicians on the payroll. "Most people in the U.S. nuclear industry have never seen a manufacturing plant like this," explains Durski, surveying the gigantic hangar where half a dozen steam vessels the size of school buses are under construction. He adds that, for the worldwide nuclear industry, "It's important to recruit talented young people to maintain the sector's competitiveness in the future."

There are many who say the world doesn't need a nuclear energy industry at all. Yet if the industry is here to stay for at least the next few decades--and it is, short of an overnight conversion by the West to a green lifestyle--Lauvergeon is surely right that the world needs more well-run nuclear companies like Areva. But she is surely wrong about Areva ever becoming a "normal" company. After all, in what other business does the core manufacturing ingredient have the potential to blow up the world?

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