May 28 - International Herald Tribune

Nuclear power companies in China aim to join automobile and electronics makers as export powerhouses, but big domestic expansion plans may not leave them the capacity to make an overseas push for more than a decade, analysts say.

A $1 billion deal signed last week with Russia to build and supply a uranium enrichment plant in China was another step toward civilian nuclear independence, less than two decades after China's first nuclear generator came on line.

The country sealed deals last year with Areva of France and Westinghouse for several third-generation reactors and the blueprints to allow them to develop domestic versions.

The nuclear power companies have mastered the construction of older models at a speed that is impressing Asian neighbors who cannot afford nuclear models sold by Western companies or are not allowed to buy them.

Countries like Vietnam and Indonesia are eager to build plants to convey a sense of modernity and to cut their fuel bills, and they see Beijing as the answer to financial and political problems.

"They know the Chinese have a lot of money and they're not necessarily as rigid as Western investors," said Bob Herrerra Lim, an analyst for Eurasia Group, a consulting firm based in the United States. "The Chinese could be the accelerator. They could say, 'We're willing to take a longer term look, because these countries have a strategic value to us.' And obviously there's a lot of policy behavior in many of their companies."

The timing could not be better for China, as the fight against climate change and the search for cheaper energy sources revives global interest in nuclear power.

"Their technology will improve, and worldwide demand is big," said Colette Lewiner, an analyst at Capgemini, adding that when demand starts to grow at a high pace again, "Areva, Westinghouse and other nuclear reactor suppliers cannot meet it on their own."

"I know it is serious," she said, because the Chinese had "told me they are looking for partners to export the technology."

But China is also ramping up its domestic nuclear expansion plans, aiming for a total of 60 gigawatts by 2020. Its current nuclear capacity is only 9 gigawatts, less than 2 percent of its total installed power generation capacity.

Its own experts admit that they will have to devote most of the country's technical knowledge and a large portion of the capital of both listed and state-owned companies to what will be the fastest nuclear build-out the world has ever seen.

China will need to start construction on about four new generators a year through 2015 to meet its ambitious target.

Beijing sees nuclear plants as a partial answer for its mounting pollution and energy security problems, although China's electricity use is growing so fast that even after the breakneck expansion nuclear will provide only about 5 percent of its power.

The speed of the expansion is tying China to the second- generation models that have faced teething troubles rather than the safer third-generation plants it has begun buying.

Ambitious managers at all the country's big five listed power companies want to join the sector, once the preserve of two state- owned firms.

One of the country's biggest electricity producers, Datang International Power Generation, has already invested in the Ningde Plan in southeastern Fujian Province, with the first reactor due to come on line in 2012.

Nuclear is attractive because it diversifies Datang's generating mix, adding a type of plant with a relatively predictable operating margin because fuel is such a small portion of costs.

Despite China's desire for a speedy expansion, its focus on developing domestic technology means companies like Westinghouse and Areva are unlikely to repeat deals for entire plants.

But they will be rewarded for handing over some of their secrets by a continuing stream of smaller deals for parts that Chinese companies cannot yet manufacture or cannot produce on a large scale.

"In the future, I see a two-way flow of business," Lewiner said. "There will not be so many sales of big third-generation plants, but equipment sales to China will be good."

"In the other direction," she added, "Western firms will be re- exporting from China nuclear equipment and sharing skills."

Another area where Areva looks set to pick up steady business in China is reprocessing nuclear waste.

"Fuel manufacturing and reprocessing of used fuel are areas where China needs Western technology, because they cannot do this on an industrial scale," she said.

Originally published by Reuters.

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