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Xi's U.K. Nuclear Deal Seen as Boon for Chinese Reactor Exports

  • China to invest $9.3 billion in most-expensive nuclear project
  • China to submit nuclear reactor design to U.K. next year

China’s 6 billion pound ($9.3 billion) investment in the U.K.’s first nuclear power project in a generation may be the biggest boost yet for the Asian nation’s efforts to gain wider acceptance for its atomic technology and expertise.

QuickTake Nuclear Fission

The venture to build Electricite de France SA’s Hinkley Point project, the most-expensive atomic energy station ever, paves the way for one of China’s biggest nuclear power companies to design a future U.K. reactor. As part of the deal announced Wednesday during President Xi Jinping’s visit, they also agreed to develop a 1 gigawatt plant at Bradwell in southern England that may incorporate Chinese nuclear technology.

“Getting a contract to build a reactor in the United Kingdom would constitute a great endorsement of their abilities,” M. V. Ramana, a professor at Princeton University’s Nuclear Futures Laboratory, said by e-mail. “China’s main challenges in entering the reactor marketplace are the widespread perception that Chinese-designed reactors are lacking in safety and concern that the Chinese companies might be able to build reactors in China but have no experience outside the country.”

Construction on the first domestically developed Chinese reactor -- known as the Hualong One -- began in May in China’s Fujian province and the companies behind the reactor design say they want to export the technology widely.

Brand Recognition

China General Nuclear Power Corp. will provide 6 billion pounds to EDF and the U.K. government to build the 18 billion-pound Hinkley station in southwest England, one of the final steps before the start of construction. A final investment decision on Hinkley will be taken by EDF in the next “few weeks”, Vincent de Rivaz, chief executive officer of EDF’s U.K. unit, told reporters on a call on Wednesday.

The U.K. project will help Chinese nuclear developers “get world-class brand recognition and make it easier for them to sell the technologies to other parts of the world,” Shi Yan, a Shanghai-based analyst at UOB-Kay Hian Ltd., said by phone.

In order to successfully sell its technology to foreign customers, demonstration of the equipment is necessary, Premier Li Keqiang said during a June 15 visit to the Beijing office of China Nuclear Power Engineering Co., a unit of CGN. China plans to export as many as eight domestically produced third-generation nuclear reactors by 2020, China Daily reported in June, citing Li Xiaoming, assistant general manager at China National Nuclear Corp., which is also working on the Hualong One design.

Cheaper Reactor

China National Nuclear signed a deal last year to build a reactor in Argentina while CGN forged a similar agreement last month in Kenya. China has a track record of building new reactors at a lower cost than in Europe or the U.S., making it popular among developing nations. The Hualong One is about 30 percent cheaper to construct than the average U.S. nuclear reactor, according to Steve Wong, an analyst at China Galaxy Intl Financial Holdings.

China’s nuclear capacity is forecast to rise to 29 gigawatts this year from 20 gigawatts in 2014, according to data compiled by Bloomberg Intelligence. As a way to combat harmful pollution blanketing its cities, the nation is eyeing even more ambitious targets, aiming to reach 58 gigawatts of nuclear-generating capacity by 2020. Of the 67 reactors currently under construction globally, 23 are in China, according to the International Atomic Energy Agency.

“China will remain the world’s biggest nuclear market in the near future,” Lin Boqiang, director at the Energy Economics Research Center at Xiamen University, said by phone. “China will continue to be the world’s biggest nuclear factory for at least the next 15 years.”

‘Bigger and Bigger’

CGN Power Co., China General Nuclear’s Hong Kong-traded unit, dropped 1.4 percent to HK$3.50 as of 11:32 a.m. local time while the city’s benchmark Hang Seng Index fell 0.8 percent. China National Nuclear Power Co., CNNC’s Shanghai-traded unit, gained 2.4 percent to 10.71 yuan, compared with a 0.2 percent rise for the Shanghai Composite Index.

“The U.K. investment is definitely good news for those listed units, even though they won’t see any immediate benefits in the short term because the deal was conducted at parent level and spans many years,” UOB-Kay’s Shi Yan said. “In the longer term, they will have a chance get a larger piece of a pie that will only grow bigger and bigger as China’s nuclear companies expand globally.”

Capacity Expansion

China’s nuclear push isn’t without controversy, with environmental groups and others inside the country and elsewhere asking whether such ambitious plans can be achieved safely. The Guardian newspaper in May said He Zuoxiu, a leading Chinese scientist, had expressed concerns about safeguards, calling China’s plans for rapid expansion “insane.”

“China has been playing catch up on nuclear safety matters, spending much more on infrastructure and qualified personnel,” Mark Hibbs, a senior associate in the Carnegie Endowment for International Peace’s nuclear policy program, said by e-mail. “However, it is an open question whether China’s current commitment is enough to assure that reactors in operation and under construction will be adequately covered.”

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