Westinghouse Reactor Deal with China First Lap in $50 Billion Nuclear Program

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Researched by Industrial Info Resources (Sugar Land, Texas). The decision announced by China’s NDRC (National Development and Reform Commission) to purchase four nuclear reactors from Westinghouse Electric (Monroeville, Pennsylvania), a U.S.-based company, against competition from French and Russian nuclear plant suppliers, suggests that the employment of multilingual translators at the top of their game has been at full stretch in Beijing over the past few months.

The contract signed with Westinghouse Electric and its consortium partner, The Shaw Group (NYSE:SGR) (Baton Rouge, Louisiana), which owns 20% of Westinghouse, for four 1,100-megawatt (MW) AP 1000 reactors is valued between $5.5 billion and $8 billion and will create 5,000 jobs in the U.S. Although the China Atomic Energy Authority has said that it will rely on domestically created technology to reach the goal of 40,000 megawatts (4% of the national total) of nuclear powered generating capacity by 2020, it has added the proviso that the import of advanced technologies will be permitted under policy guidelines. The authority says that the domestic nuclear power plant industry will continue to produce second generation power plants rated at around 600 MW until 2015 and then the industry would be equipped to manufacture third generation reactors in the Westinghouse AP 1000 class.

Observers who have been watching the competition between Westinghouse, France’s Areva and Russia’s AtomStroyExoport for the reactor deal over the past two years say that the Toshiba-owned Westinghouse may have edged the deal with a willingness to transfer more technology to the Chinese than the other companies. The security of intellectual property and patents is still an issue in leading industrial technology deals with China. The French and other commentators have said that the massive $240 billion trade imbalance between China and the U.S. may well have been a catalyst that helped tip the deal. Naturally, the Chinese government says that Westinghouse won by the technical merits of its bid.

Steve Tritch, Westinghouse President and CEO, said at the contract signing, ”Approximately one-half of the scope for the first four plants will be sourced from within China. Over time, though, as Westinghouse wins additional contracts for new plant work in China, additional scope will be sourced in country. However, Westinghouse, our U.S. supplier base and our consortium partners will continue to benefit much as we are now in the Republic of Korea, where recent plant awards from that country’s maturing industry will provide about $100 million per plant in U.S. scope.”

The new reactors will be constructed at nuclear power station sites in Yangjiang in Guandong province and in Sanmen on the eastern coastline of Zhejiang province.

Currently, China has nine nuclear power generating reactors with four French designed, two Canadian and one Russian with another two due to go into operation by the end of March 2007. To boost nuclear sourced power from the current 9,600 megawatts to 40,000 megawatts by 2020 will require 32 nuclear units to be constructed averaging 1,000 megawatts over the next fifteen years, according to the NDRC.

Plans have been announced for a project to start building a 2,000 MW nuclear power station in the northeastern Lianing province in 2007, with no indication of whether it will be contracted to a foreign or domestic company. New plants are reported to be on the way in Fujian, Shandong, Anhui, Hunan, Hubei, Jiangxi, Sichuan and Shanghai. Final approval by NDRC is not yet complete.

China’s nuclear building program is estimated to need an investment of $50 billion, which is 25% of the $200 billion that the IEA (International Energy Agency) estimates will be invested in the global nuclear power generation industry through 2030. The French and the Russians have been geared to take their slice of this business, Westinghouse’s China deal has given them the inside track for the first lap of the great Chinese nuclear power race.

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