The deal was driven by uproar earlier this year over the French aircraft carrier Clemenceau, laden with asbestos and stranded at sea amid concern about the safety of workers in India who were to dismantle it. Europe has no yards to break down such large ships, and the Clemenceau's saga underscored the need for a way to put them to rest.

Suez SA announced Monday that subsidiaries Endel and SITA and another French company, Constructions Mecaniques de Normandie, have won a €3.3 million (US$4.18 million) contract from the French navy to dismantle the Lucifer, an anti-submarine frigate.

"It's the result of the acknowledgment by the authorities, and by the players in our market, that we can no longer abandon boats just anywhere," said Jean-Louis Chaussade, director of Suez Environnement, said by telephone.

Chaussade said the idea came out of the Clemenceau controversy, and called the project "the first stone" in a new European shipbreaking industry.

No European countries are currently able to break down vessels larger than 5,000 tons — the weight of a frigate. Chaussade said some 700 vessels of that scale in Europe already need dismantling, calling it a potential €1 billion (US$1.27 billion) a year market.

Environmental groups welcomed Monday's announcement.

"We're very happy that several initiatives are being taken not only in France but in the rest of Europe to establish a shipbreaking industry," said Ingvild Jenssen of the NGO Platform on Shipbreaking. "This is what we called for several times."

Her group includes Greenpeace, whose protests drew attention to the Clemenceau's fate and were instrumental in forcing the French government to bring it back to France.

The Lucifer project will begin in 2007 and should take one year to complete, Suez said. It will be dissembled in dry dock in Querqueville on the Atlantic Coast, where it has remained since it was damaged in a fierce storm in 1997.

Experts will first determine the levels of asbestos, fuel or other toxic waste on the ship and then determine acceptable conditions for workers, Chaussade said.

The Lucifer was built in 1942 and decommissioned in 1959, and later served as a training ship for fire safety exercises.

Many questions remain about how the new industry will develop, including where dismantling facilities would be located, and whether it could grow as a multinational consortium or as competing companies.

Chaussade urged French companies to seek the lead in the lucrative industry.

"It is not idiotic to try to place it in France," he said.

Suez is also hoping to bid for a contract to dismantle the Clemenceau.