Kazakhstan in nuclear deal with Beijing

Wednesday, November 21, 2007

By Isabel Gorst in Almaty

Kazakhstan has agreed to share its uranium resources with China in exchange for equity in Chinese nuclear power facilities in a strategic deal that brings together the world's fastest growing uranium and nuclear electricity producers.

Moukhtar Dzhakishev, the president of Kazatomprom, Kazakhstan's state-owned nuclear power company, said: "We will swap shares in uranium production for shares in Chinese atomic facilities... This is the first time China has allowed any foreign company to become a shareholder in its atomic power industry enterprises."

China National Nuclear Corp and China Nuclear Guangdong Power Corp, China's leading nuclear power companies, would team up to take a 49 per cent stake in a uranium mining venture in Kazakhstan with Kazatomprom retaining a 51 per cent stake, Mr Dzhakishev said. In exchange, Kazatomprom would take equity in Chinese nuclear fuel processing or electricity generation plants.

Details of an agreement signed by the Chinese government are expected to be finalised by next month.

The deal, a breakthrough for the secretive Chinese nuclear industry, highlights China's aggressive campaign to secure energy resources in central Asia.

China agreed this year to help build an oil pipeline linking Kazakhstan's oil-rich Caspian region with northwest China and a natural gas pipeline from Turkmenistan across Kazakhstan to Shanghai.

Beijing plans to build

40 new nuclear power plants by 2020 to reduce dependence on polluting coal-fired electricity generation. But its uranium reserves, including mines in Xinjiang province near the Kazakh frontier, are declining.

Meanwhile, Kazakhstan plans to more than double its uranium output by 2010, overtaking Canada and Australia to become the world's biggest producer.

Uranium prices have surged in the past three years spurred by a worldwide revival in interest in nuclear power as an alternative to high-cost oil.

Foreign companies including Areva of France, Canada's Cameco and Japan's Sumitomo have entered uranium mining joint ventures with Kazatomprom.

Kazatomprom operates a huge, Soviet-built nuclear fuel pellet plant in north Kazakhstan, but wants to develop more advanced nuclear fuel assembly technology to add value to its uranium business. The company expects eventually to capture about a third of world demand for nuclear reactor fuel.

Mr Dzhakishev said China would be obliged to process uranium produced at Kazakh mines in Kazakhstan and to allow Kazatomprom to use its nuclear fuel assembly facilities.

Kazatomprom bought a 10 per cent stake in Westinghouse, the US nuclear technology company, from Toshiba for $540m (€370m, £265m) this year.

The partnership mirrors the Chinese deal, by providing Westinghouse with a guaranteed source of uranium and Kazatomprom with access to fuel processing know-how and technology.

Mr Dzhakishev said Kazatomprom's deal with China was "exclusive".

China was attracted by the proximity of Kazakh uranium mines. Kazakhstan's "non-super power status" was another advantage, with the republic able to maintain a distance from any international controversy about the politically sensitive nuclear industry.

Kazakhstan was a big nuclear weapons producer in the Soviet era, but surrendered its warheads after independence in 1991.

Published: November 19 2007 02:00 | Last updated: November 19 2007 02:00

Copyright The Financial Times Limited 2007

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