China has restarted its stalled nuclear reactor development programme, approving roll-outs of new and semi-completed projects. New safety protocols for new build and waste treatment are also driving new equipment and service contracts.
China halted all projects, and suspended approvals of new projects, in the wake of the Fukushima Daiichi disaster in Japan last year and initiated a safety audit on all current and future projects to ensure nothing similar could happen in China.
This October the Chinese Ministry of Environmental Protection (which last year replaced the State Environmental Protection Administration, better known as SEPA) has formally approved environmental certification to all nuclear projects in the country.
Their report claimed that all reactors in China had now been monitored under strict safety protocols and that no accident above level two, defined as a failure of safety measures, but without actual consequences, has ever occurred in China. Additionally the Ministry has granted certification to 778 people passing nuclear safety exams. The planned roll out is now officially back on.
The Chinese nuclear industry obviously welcomed the decision while nuclear related stock processes in China soared after a period in the Doldrums awaiting the new go-ahead.
Nuclear still underutilised
According to the National Energy Administration in Beijing, China has 15 nuclear reactors in operation with 26 more reactors currently under construction. However, nuclear is still underutilised by international standards in the PRC – the 15 reactors in operation are capable of producing approximately 10 million kilowatts of power, which equates to just 1 per cent of China's annual energy production.
Announcing the resumption of construction, Gao Shixian, the assistant director of the energy research institute under the National Development and Reform Commission (NDRC), China's top economic planning agency told the domestic media: "There is a consensus in China that we should not give up on nuclear power."
Indeed China, though slowing slightly economically this year to around 7.4 per cent GDP growth, still needs the extra power. Though slower than previous months, China's electricity consumption still managed to rise 2.9 per cent year on year to 405.1 billion kW hours in September.
New build and waste treatment
In addition to approved nuclear reactors, including those that had already broken ground pre-Fukushima Daiichi, the publication of the new safety approval report also means that ancillary projects, such as nuclear waste treatment plants and remodelling projects to improve the safety level of existing nuclear facilities, can also now move forward.
According to the World Nuclear Association, on-going and proposed construction is slated to boost China's nuclear generation from about 12 gigawatts to 60 gigawatts by 2020 and then to 200 gigawatts by 2030.
The report was not without costs, though. Safety upgrades will have to be made to existing reactors and incorporated into plans for those under construction.
The Global Times, a Communist Party controlled newspaper in Beijing, reported that these safety upgrades in the wake of Fukushima would cost the industry approximately RMB80 billion (US$12.75bn).
Costly upgrades; new contracts
These upgrades must be made by 2015 at the latest and the language is rather complicated talking of “multiple standards of safety,” a term that requires some clarification from the Ministry.
And almost immediately after the release of the Ministry’s report, new contracts related to nuclear reactors were announced as the industry got back into gear.
Just one day after the official announcement it was reported that Rolls-Royce had been awarded a contract by China Guangdong Nuclear Power Corporation (CGNPC) to supply its Spinline digital safety instrumentation and control (I&C) technology to modernize the Neutron Instrumentation Systems at reactor units 1 and 2 of the Ling Ao Power Plant in Shenzhen, near the Hong Kong border.
This is a contract linked to the safety upgrades required by the Ministry of Environmental Protection’s report. Rolls-Royce Instrumentation and Control president Benoit Chabre claims that the company provides safety-critical instrumentation and control systems to 70% of China's civil nuclear reactors currently in operation or under construction.
Additionally, uranium shipments to China have restarted with new providers now shipping to meet the demand that will now come on-stream as projects restart or near completion and testing phase.
For instance, Energy Metals, a dedicated Australian Uranium exploration company with a portfolio of advanced projects located in the Northern Territory and Western Australia, has shipped its first load of uranium to CGNPC and the China Uranium Resources Corporation Ltd (a wholly owned subsidiary of CGNPC with a significant financial holding in Energy Metals) under the terms of the Natural Uranium Concentrates Sales Agreement signed back in December 2011.
CGNPC is the largest beneficiary of the nuclear restart as it has 15 of the two dozen planned new nuclear power units under its control with a total capacity of 17,500MWe once up and running.
Last week it was announced that Tianwan Nuclear Power Plant's No.3 and No.4 reactors were granted environmental clearance, according to a Global Times report.
More deals top come
As China’s nuclear resumption gets underway it is expected more deals will be announced soon for both equipment and uranium. However, funding the ambitious expansion will also become a key issue. China will need outside investors to achieve its targets.
Traditionally the Beijing governments and Export Credit Agencies (ECAs) have funded development, but increasingly outside investors will be invited in. Evidence that this is happening came in recent weeks, in the wake of the report, with the news that Nuclear Steam System Supplier (NSSS) vendors have recently been taking equity stakes in China National Nuclear Power (CNNC).
More Nuclear IPOs on the cards
China Nuclear Power Co, part of parent company, CNNC, recently announced plans to conduct an IPO to fund five nuclear projects with a required investment of RMB173.5 billion (US$27.25bn).
Sun Qin, chairman of China National Nuclear Corp said last month that it is considering an A-share listing, subject to approval by the China Securities Regulatory Commission, according to a Global Times report.
In recent weeks, though, more nuclear companies in China have also passed the test and have been green lighted to do public listings, according to local business news reports. There seems to be a direct correlation with the number of environmental clearances for nuclear projects and the increased number of IPO announcements.
China Nuclear Engineering Corp passed the environmental examination of the Ministry of Environmental Protection (MEP) on November 1, which would permit it to list on the A-share market. The company plans to raise 1.8 billion yuan ($288m) on the Shanghai Stock Exchange for six projects, according to information on the MEP's website.
CNNC’s Sun disclosed that other nuclear firms, such as China Guangdong Nuclear Power Group, also have listing plans. For example, The State Nuclear Power Technology Corp, which is reportedly preparing for an initial public offering (IPO) has an established a team to prepare it, Zuo Xinci, a spokesperson for the company, told the Global Times.
The increased pressure to ensure that all nuclear projects in China follow new universally accepted health and safety guidelines will increase the amount of funds required to build the reactors. The criteria will also mean that China will have to look outside its borders to attain the proper technology and H&S expertise to meet those objectives. But with such a short window to build such a large number of projects, European and US O&M companies and OEMs should be working with the Chinese nuclear sector and the MEP right now to take advantage of this massive sales opportunity. Their early involvement will help shape the future outlook of the Chinese nuclear energy sector and its relationship with outside suppliers and investors.
In the wake of the recently announced investigation of Rolls-Royce by Britain's Serious Fraud Office, which is investigating the firm for alleged bribery and corruption in Indonesia and China, Rolls-Royce said that the outcome of the investigation is uncertain, but could lead to prosecutions of individuals and the company itself. It added that the Serious Fraud Office is investigating dealings with intermediaries, according to an AP report.
John Rishton, chief executive of Rolls-Royce, said that he and the board will not tolerate "improper business conduct of any sort and will take all necessary action to ensure compliance."
Rolls-Royce said it will appoint an independent senior person to lead a review of current procedures and report to the board's ethics committee.
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