New Build

With China Light and Power’s recent equity investment into China’s Yangjiang nuclear power station, Paul French reports on this historically significant deal and the potential opening up of foreign collaboration and private equity investment into China’s nuclear energy sector.

By Paul French, Asia Correspondent

Hong Kong’s largest electricity supplier, China Light and Power (CLP), has taken a 17% stake in the Yangjiang nuclear Power Station (YNPS), just across border from Hong Kong in southern China’s Guangdong province.

Few foreign investors have ever been allowed to enter China’s nuclear sector as equity stakeholders and CLP, owned largely by the Kadoorie family as their flagship holding in the Hong Kong Special Administrative Region (SAR), is among the first.

The financial terms of the deal have not been released.

Under construction

The six-unit YNPS is currently under construction.

Other investors in the project  include China Guangdong Nuclear Power Corporation (CGNPC) and Guangdong Yudean Group Corporation, a Beijing state-owned power generation group with headquarters in Guangzhou, as well as CGN Phase I Private Equity Fund Company Ltd.

YNPS will eventually generate 6,000MW (via six 1,000MW CPR-1000 PWRs) and be CGNPC’s second nuclear power plant after the nearby the Daya Bay project. Construction of the first of two units at Yangjiang began in December 2008 and should enter commercial operation in 2013. The entire project is planned to be operational by 2017.

Chan Siu Hung, director of CLP’s subsidiary CLP Nuclear Investment Company Ltd, told the Hong Kong media: “The Yangjiang project reinforces CLP’s ongoing commitment towards low carbon generation to meet the interim target of increasing our non-carbon-emitting generating capacity to 20% by 2020, as set out in our Climate Vision 2050.”

CLP also believes that Yangjiang will be a major step in achieving Beijing’s stated goal of cutting 40-45% of carbon dioxide emissions per unit of GDP in China by 2020 from its 2005 level.

Southern China’s Pearl River Delta (PRD) region is a major source of carbon dioxide emissions due to the fact that it is China’s major manufacturing-for-export base.

CLP and Beijing develop stronger ties

CLP and Beijing have been working more closely in recent years since the handover of Hong Kong from Britain to China in 1997.

Beijing approved the extension of CLP’s power supply contract to Hong Kong and CLP is working with mainland Chinese companies on wind power and other new energy projects as well as having an involvement in Daya Bay.

Currently CLP gets 70% of the output from Daya Bay’s two 944MWe reactors, providing a quarter of all Hong Kong’s power requirements.

Last year CLP negotiated a 20-year contract extension with Daya Bay. 

Signs of openness?

What many are now asking is, can CLP’s investment in Yangjiang be seen as a signal of a new openness to investment in China which is aiming to boost nuclear power generation capacity nearly eightfold to 70GW by 2020?

The approval in January by the State Council (China’s highest executive organ) to create a National Energy Commission (NEC) as a “super ministry”, led by Premier Wen Jiabao and Vice Premier Li Keqiang, was seen by many as an indication that the PRC’s energy policy, including nuclear, would be more joined-up and perhaps open to additional foreign involvement.

However, the drive to a completely indigenous reactor design (see previous Nuclear Energy Insider articles on CAP1400) may have benefited Westinghouse, but appears to have frozen players such as GE and others out of the market temporarily.

It seems that limited investments in projects, such as CLP’s new stake in Yangjiang, may be a possible way forward for China’s energy regulators.

But Daniel Money, a project analyst with the Nicobar Group in Shanghai, a consultancy specialising in developing strategy and executing turnkey technology and operations transfer in China for US nuclear companies, can only think of one other foreign company that has taken an equity stake in a Chinese nuclear project – France’s EDF, which has a 30% stake of the Taishan nuclear plant in Guangdong.

Mr Money points out that EDF had a long history of previously working with Beijing as does CLP, having been involved in Daya Bay since the 1990s.

Grey lines still present

He also notes that, as a Hong Kong SAR company, CLP is perhaps considered special, “it’s a grey line as to whether Beijing considers CLP a Chinese company or not being from Hong Kong.”

Mr Money at Nicobar believes that, rather than more foreign companies taking equity stakes in Chinese nuclear projects, Beijing will encourage domestic power companies to “cross invest” and for electricity generators to start investing in nuclear plants – “there is a strong trend now of liberalisation at a local level with traditional power generators becoming involved in nuclear projects.”

Mr Money also notes that’s the CLP investment was “atypical” as it was made after the Yangjiang project had started construction whereas normally such decisions would be made prior to the groundbreaking on any project.

All in all Mr Money and Nicobar believe that while foreign firms will continue to seek to sell technology and equipment to China’s nuclear industry, “other foreign players are still unlikely to become involved as equity investors for the moment.”

Image: Premier Wen Jiabao