China edges ahead in Turkey nuclear race

Tuesday, April 10, 2012

China appears to be edging ahead in the international contest to build a new nuclear power station on Turkey’s Black Sea coast – a sign of how the ambitions of its nuclear companies are poised to reshape the global nuclear industry.

Beijing is not looking for government guarantees for the project and can supply its own financing, according to an Ankara official, pointing to China’s advantage in the race to build the reactor for Turkey.

More than a year after the disaster at Fukushima Daiichi in Japan, as nuclear programmes in developed countries such as Germany and Japan have been slowed or shut down, emerging economies have become the focus for nuclear companies competing for new contracts.“They don’t have a financing problem. If they agree they will build it,” said the Turkish energy official, adding that a visit to Beijing this week by Recep Tayyip Erdogan, Turkey’s prime minister, would shed more light on prospects for the project.

While China is a relative newcomer to this game, having built overseas reactors only in Pakistan, the state-backed nuclear groups China National Nuclear Corporation and China Guangdong Nuclear Power Corporation have ambitions to become global suppliers of nuclear energy and appear to be making some progress in emerging economies. China is the world’s biggest builder of new nuclear reactors.

Because Beijing is not demanding state guarantees for the Turkish projects, its approach contrasts with South Korea, whose negotiations over the plant have previously broken down over Seoul’s insistence on such support.

Meanwhile Japan’s ambitions to build the Black Sea plant have been hit by the Fukushima disaster, which led Tokyo Electric Power to withdraw from the project, although Toshiba is still preparing a bid.

The Chinese bid is due to receive another boost this week when Mr Erdogan visits Beijing and is expected to sign an agreement on peaceful nuclear co-operation, a necessary although not decisive condition for any deal. China has nuclear co-operation agreements with several countries, including Mongolia, Niger and Belarus, but most of these are focused on uranium supply.

China’s state-backed nuclear companies have been hampered in their foreign bids, however, by the limited range of reactors they are able to build overseas, which is restricted to older models developed domestically. The companies are contractually prohibited from exporting the most modern reactors being built in China because foreign companies such as Westinghouse and Areva own the copyrights for those reactor designs.

Analysts say China’s indigenous reactor designs are quickly catching up. Designs for the latest “third generation” models are expected to be finalised by next year, but it could take years after that to build the first reactors and market them abroad.

“China does want to go out and they are going to be aggressive in providing the financing so that some countries accept the offer,” said Guo Shou, power analyst at Barclays in Hong Kong. “The problem right now is the acceptance of the Chinese technology.”

Chinese nuclear component suppliers are also expanding overseas. Dongfang Electric, one of China’s top component manufacturers, signed its first nuclear export contract last year in a deal to supply France’s EDF with low-pressure heaters.

In a forthcoming tender for a nuclear plant in South Africa – which will be a barometer of China’s acceptance as a nuclear provider – CGNPC is expected to be involved in a bid. EDF told reporters earlier this year that a joint bid between EDF and Chinese companies might be possible. EDF subsequently told the FT that it was premature to say whether EDF might launch a joint bid with the Chinese because the tender process had not yet formally started.

Other non-nuclear Chinese utilities, including grid operators, power plant builders and hydropower companies, have raised their overseas profile rapidly in recent years, increasingly taking on western companies in their home markets.

In Turkey, the reactors are a high priority project for the Turkish government, which has a more pro-nuclear stance than elsewhere in Europe. The country has few energy resources of its own and Ankara sees nuclear power as essential to controlling its energy import bill. Turkey has already struck a deal with Russia’s Atomstroyexport to build the country’s first nuclear power plant on the Mediterranean coast.

CNNC and CGNPC did not respond to requests for comment.

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