Merger To Increase China’s Clout In Nuclear Power Market
China Power Investment Corp. and the State Nuclear Power Technology Corp announced a merger this week. Nothing at this scale happens in China without the approval of the central government. The working assumption is the multi-billion firm that emerges from the merger, which will be named the State Power Investment Corp., may operate more like a sovereign wealth fund in terms of financing nuclear reactor deals than building them. The firm is expected to have assets worth an estimated $113 billion.
Reuters reports that China National Nuclear Power Co plans to raise $2.13 billion via an IPO. The wire service cites the fact it is one of the largest offerings of its kind in the past four years. In 2014, Reuters notes, CNNC’s major rival, China General Nuclear Power Corp, listed on the Hong Kong stock exchange raising $3.2 billion.
Export plans will put new demands on capital markets
China plans its total nuclear capacity to be 58 gigawatts by the end of 2020. This goal puts China’s capital requirements for nuclear energy projects in the stratosphere to complete all the planned domestic reactor projects.
Chinese nuclear firms have export plans which involve taking significant equity positions in these deals which will require even more working capital. Recent export efforts by Chinese nuclear firms include planned equity positions in the UK Hinkley Point project, a new reactor in Argentia, two new reactors in Romania, and two more in Pakistan.
Domestic spending to create and sustain the supply chain for domestic and exported reactors will create a huge demand for nuclear engineers and in related engineering fields as well as skilled trades. This means there will be parallel investments in the firms that will build the reactor components and in the educational infrastructure that will supply the workforce.
The other two players among China’s state-owned nuclear reactor developers are China National Nuclear Corp (CNNC) and China General Nuclear Power Group (CGN). These two firms nominally have cooperated in development of the Hualong One, a 1000 MW PWR type reactor, but, in fact, are building different variations of it at two different sites in China.
All of these firms have their eye on exports, but only the Hualong One has booked a sale, with Argentina, so far. China’s export deal in Romania is for two CANDU type reactors which may involve Canada’s S.C. Lavalin as the reactor vendor.
Other state-owned nuclear firms, which are subsidized by their respective governments, may see the merger to form the new State Power Investment Corp as having the potential to be a new and powerful player in world markets. In particular, its creation may play a role in determining the French government’s strategy to strengthen EDF’s hand, financially, as its takes over Areva’s reactor division.
China boosts its hunt for uranium
With 27 reactors in operation, two dozen reactors under construction, and an equal number likely to be started in the next few years, China is on the hunt for uranium and not just as a customer. The China National Nuclear Corp (CNNC) is searching for acquisitions to control supplies and insure their stability over the next several decades.
At CNNC’s annual meeting, CEO Wang Ying is reported to have said opportunities include properties in Canada, Australia, and Kazakhstan. Ying said the company is looking for both producing sites and those with development potential. CNNC is also in talks with the government in Mongolia to access to its uranium resources.
With low uranium prices, the stocks of uranium firms, which are based on proven recoverable assets relative to the price on open markets, are a bargain. Wang noted that the world has a surplus of uranium since all of the Japan’s reactors have been shut down since 2011. UX reports that the spot price for uranium oxide (U3O8) is pegged at $35/pound.
This low price makes it uneconomical to open new mines where production prices could be as high as $45/lb. Typically, a high value mine will yield between four and eleven pounds of uranium per tone of ore. The OECD’s Nuclear Energy Agency estimates China will need 8,200 tU of uranium by 2020, twice that amount by 2025, and two-and-a-half times the 2020 figure by 2035.
China may find itself competing with Russia which has 30 reactors in various stages of planning in over a dozen countries according to a May 12 report on the web site The Street. The report quotes uranium expert David Talbot of Dundee Capital Markets who points out that Russian demand for uranium may become just as significant as China’s or India’s requirements.
Talbot points out that Rosatom offers customers a complete fuel cycle not only supplying the commercially enriched fuel, but also taking back the spent fuel and reprocessing it. He calls Rosatom “an aggressive one stop shop”
Vietnam continues slow development of plans for eight reactors
The director general of the Vietnam Atomic Agency, Hoang Ahn Tuan, tells English language media in that country that plans to develop eight nuclear reactors will only go forward when the country is ready. By this he refers to the creation of a nuclear regulatory agency and the staff to run it.
Specific work on the Ninh Thuan Plan 1, which is expected to be the first of four Russian built VVER type light water reactors, includes environmental assessments of a site and a complete understanding of the design and safety factors associated with building and operating the reactors.
The permanent workforce for each reactor will require nearly 1100 people including 900 with engineering training at the university level and another 200 technicians. Currently, about 300 engineers are in training at Russian institutes.
The Ninh Thuan site broke ground in 2014, but Mr. Tuian said construction has been pushed back two-to-three years so that work force development and creation of a government safety and regulatory infrastructure can be completed.
Rosatom is set to build the first four of Vietnam’s eight planned reactors. A consortium of Japanese firms is pursuing being the developers of the next four.
Vietnam’s current electrical generation comes mostly from coal. It wants to develop reliable power to continue development of its contract manufacturing exports and also to supply power to exploit its bauxite deposits to create a finished goods aluminum industry.
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