China picked Toshiba Corp.'s Westinghouse Electric Co. for the biggest
international nuclear reactor contract in history, trumping Areva SA for a
project worth about $5.3 billion.
Westinghouse will build two reactors at Sanmen in Zhejiang province and two at
Yangjiang in Guangdong, the U.S. Department of Energy said. U.S. Energy
Secretary Samuel Bodman and Ma Kai, head of China's National Development and
Reform Commission, signed the agreement in Beijing today.
China becomes the first customer for Monroeville, Pennsylvania-based
Westinghouse's latest technology. The U.S. company, bought by Japan's Toshiba
for $4.16 billion in October, gains an edge in bidding to supply as many as 26
more reactors by 2020 as China turns to atomic energy to cut coal pollution and
reduce reliance on oil.
``It's more a sensitive and political decision,'' Alice Hui, an analyst at UBS
AG in Hong Kong said today. ``Awarding the contract may ease trade pressures
with the U.S. It's also China's desire to gain access to new U.S. technology
which it doesn't yet have.''
The contract to build the plants for China National Nuclear Corp. ends almost
two years of negotiating and lobbying by Westinghouse, Paris-based Areva and
Russia's AtomStroyExport. China, which wants to get 4 percent of its power from
nuclear energy by 2020 from about 2.3 percent now, needs to add two reactors a
year to meet the target.
Trade Talks
The agreement, signed during a five-nation energy summit, came after the first
round of new biannual China-U.S. trade talks. Treasury Secretary Henry Paulson
led a team of Cabinet officials to try to persuade China to spur domestic demand
and narrow a record trade gap that is fueling demands for protection among some
lawmakers and companies.
Federal Reserve Chairman Ben S. Bernanke urged China to let its currency gain at
a faster pace to end a ``distortion'' that benefits exporters. The U.S. trade
shortfall with China swelled to $24.4 billion in October.
``This represents a multi-billion-dollar commitment by the Chinese that should
generate some 5,500 jobs in the United States,'' Bodman said. ``It demonstrates
that enhanced cooperation can yield benefits to both nations and advance our
mutual goals of energy security and improved environmental stewardship.''
China's order is part of more than $200 billion forecast to be spent worldwide
on nuclear power by 2030, according to the Paris-based International Energy
Agency, an adviser to 26 of the world's largest energy users. A surge in oil and
natural gas prices and concern that the carbon dioxide released by burning
fossil fuels leads to global warming are driving the revival.
Construction Start
The construction of the nuclear reactors will start in early 2007, Baton Rouge,
Louisiana-based Shaw Group Inc., a Westinghouse partner on the project, said in
a statement today. Shaw Group owns a 20 percent stake of Westinghouse.
The four reactors will be Westinghouse-designed AP 1000 units, with capacity of
1,100 megawatts each, the department said in the statement. The plants should
start operating by 2013, Westinghouse President Stephen Tritch said.
Westinghouse agreed to transfer technology to China that could be used in the
construction of more nuclear reactors in China during the next 15 to 20 years,
Bodman said.
``The Chinese were very demanding,'' he said at the State Guest House, where the
accord was signed. ``Chairman Ma and the NDRC were very demanding,'' he said
without elaborating.
Short List
China National Nuclear, the largest nuclear power plant builder in the world's
second-biggest energy consumer, short- listed the three companies in February
2005. The nation, which relies on coal and oil for 90 percent of its energy
needs, wants to increase the use of cleaner-burning alternatives such as nuclear
to cut pollution and its reliance on coal imports.
``This project of cooperation will certainly play a very important role in
enhancing the cooperative partnership between China and the U.S.,'' Ma said
today.
The cost of building a kilowatt of AP1000 capacity is between $1,000 and $1,200,
according to Westinghouse's Web site.
``The cost using AP1000 technology is cheaper compared with the French
technology,'' Hui said. ``The risk is that the U.S. technology is not proven
yet, no reactor has yet been built using the technology.''
Japan-China Tensions
Tokyo-based Toshiba, Japan's biggest supplier of nuclear power reactors by
capacity, said Oct. 17 it had completed the purchase of 77 percent of
Westinghouse.
``China, along with the U.S., is one of the biggest potential markets for the
nuclear power business,'' Toshiba spokesman Keisuke Ohmori said by telephone
from Tokyo. ``We plan to further expand our global reach.''
Toshiba plans to expand its nuclear business, including nuclear plant
construction, maintenance and fuel, to 900 billion yen ($7.6 billion) in the
year ending March 2021, compared with 400 billion yen now, the company said in a
statement on Oct. 17.
Awarding the contract to a Japanese-controlled company may enable China to
smooth over tensions in relations with its neighbor over contested rights to oil
and gas reserves, said Hui.
``Westinghouse is owned by Toshiba so that may also help China in its talks with
Japan on the East China Sea dispute,'' Hui said.
Nine Reactors
China has nine nuclear reactors operating in the provinces of Zhejiang and
Guangdong. Two reactors are under construction in Jiangsu in the east. Together,
these projects have a capacity of about 9,000 megawatts.
China is the third-biggest nuclear energy user in Asia, after Japan and South
Korea, according to the BP Statistical Review of World Energy June 2006 report.
Areva runs its nuclear reactor unit in a venture with Siemens AG of Germany.
Charles Hufnagel, a Paris-based spokesman for the French company, declined to
comment.
French President Jacques Chirac said he promoted bids by Areva when meeting with
Chinese counterpart Hu Jintao and Prime Minister Wen Jiabao during his visit to
China in October.
Areva, which won its first nuclear reactor contract in China in 1986 and has
built four of its nine reactors, employs 3,500 people in the country.
By 2015, as many as nine new reactors may be operating in Latin and North
America, seven in Europe and 23 in Asia, Jack Fuller, chief executive officer of
Wilmington, North Carolina- based Global Nuclear Fuel LLC, told delegates at the
Pacific Basin Nuclear Conference in Sydney in October.