Westinghouse nails down China nuclear deal
Monroeville firm will build four plants along China's eastern coast starting in 2009
Friday, March 02, 2007|
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Westinghouse will build four AP1000 nuclear power plants, like the one seen here, along China's eastern coast. The first plant is to open in 2013.
After 21/2 years, Westinghouse Electric finally has a "framework agreement" to build four nuclear power plants in China, starting in 2009.
The project details, revealed yesterday, differ somewhat from a tentative agreement touted last December during a high-profile ceremony in Beijing.
Instead of two plants in the south and two in the east of
the world's most-populous nation, Monroeville-based Westinghouse
now will build all four plants along the eastern coast, near the
East China Sea. Two will go in Sanmen [ÈýÃÅ], about 150 miles south
of Shanghai, and the other two will go to Haiyang [º£Ñô], north of Shanghai but southeast of Beijing. The first plant is expected to be ready in 2013.
Final contracts for the four plants are expected by midyear.
The two southern Chinese plants originally pegged for Westinghouse will go instead to a French rival, Areva, according to a report yesterday in the Oriental Morning Post. The French contracts are worth $5 billion, according to the report, and the Westinghouse's contracts are valued at $6 billion to $7 billion.
Westinghouse spokesman Vaughn Gilbert would not confirm an exact figure. "It is up to our customer to make a comment," he said.
The highly complicated and sensitive political process that produced this week's framework agreement illustrates how challenging it is to do business with the Chinese -- and also how willing the Chinese are to divide up plum projects both domestically and internationally.
For Westinghouse, the Chinese nuclear deal is expected to generate as many as 5,000 U.S. jobs, many in this region, where the company already employs 3,000 and may add 2,000 -- in part on expectations of the four Chinese plants and 12 other U.S. plants -- through an expansion of its research facilities either in Monroeville or Cranberry.
For China, the deal fills a need to develop as many as 30 new reactors by 2020 as nuclear power grows to 4 percent of the country's total energy sources, up from 2.3 percent today.
Such an outlay could cost the Chinese as much as $50 billion, according to the Oriental Morning Post.
Westinghouse began competing for the Chinese nuclear power deal in 2004, offering its latest model plant, the AP1000. When the Chinese announced a tentative agreement with Westinghouse in December 2006, there was no mention of Areva, Westinghouse's rival for the assignment, signaling a clear win for the Americans.
But the French government, which controls Paris-based Areva, never stopped lobbying the Chinese, sending French President Jacques Chirac to Beijing in the fall and Areva Chief Executive Officer Anne Lauvergeon in January, when the company apparently signed a "preliminary agreement" with the Guangdong Nuclear Power Group Co., owner of the southern Chinese plant projects.
Areva struck a more advanced agreement on Feb. 14, according to a Chinese news report, agreeing also to provide uranium fuel to China.
While dividing plants between the French and the Americans, the Chinese also appear to be dividing the ownership of the plants among different companies domestically, reflecting a shake-up within China's nuclear power industry.
The two plants in Haiyang will be owned by an upstart, the China Power Investment Corp., which wants to break the "monopoly" of the Chinese nuclear reactor industry, according to Caijing magazine, which covers finance and economics in China. The two giants that currently control much of the industry are Guangdong Nuclear Power Group Co., which signed the deal with the French, and China National Nuclear Corp., which will work with Westinghouse on two plants in Sanmen.
China Power Investment first gained some assets during a 2002 restructuring of the Chinese power industry and by late 2004, its chairman revealed that the company had been authorized to be the third group company developing nuclear power in China, according to Caijing magazine. Its advantage in the Westinghouse-Areva competition was that it had no past experience working with technology produced by the French and thus there would be no need for an adjustment process with Westinghouse's new AP1000 technology.
"All in all it seems like the Chinese government was exceedingly Solomonesque in how it handled both the international competition and the domestic competition," said Louis Schwartz, president of Squirrel Hill-based China Strategies, which advises U.S. companies on how to do business with the world's largest nation. "Whether that will be good for the further development of China's nuclear issue is an open question."