Tag Archives: China General Nuclear Power (CGN)

Nuclear Power Plants as Trojan Horses

The British government in July 2016 cast doubt on the future of a controversial 18-billion pound ($24 billion) project led by Electricite de France SA to build Britain’s first nuclear power plant in more than 20 years… Concern about China General Nuclear Power Corp.’s minority stake in the project may have been among reasons for the delay….
The Chinese company’s main involvement will be in the supply chain, providing some components for Hinkley, said Malcolm Grimston, senior research fellow at Imperial College London’s center for environmental policy. Operation of the facility would be in the hands of EDF, which has been in U.K. for years, he said. “The Chinese see Hinkley C as first step towards their goal of building a nuclear station using Chinese technology in the U.K. and as a stepping stone to starting a plant export business to rival the Russians, the Japanese and the French,” said Grimston. “I’m not sure what their motivation would be” to halt an operational power plant “given their interest in being seen as a trustworthy partner.”

The strategic investment agreement reached by EDF and state-owned CGN in October 2016 was to build three new nuclear power stations in the U.K., including a 1 gigawatt plant at Bradwell that the Chinese company would build using its own technology and take a 66.5 percent stake. Chinese reactor designs haven’t yet been approved by the British nuclear regulator, a process which could take at least three years.

Bernard Jenkin, the Conservative member of parliament for Harwich and North Essex, near the proposed Bradwell plant, last year urged the government to assess the security implications of a Chinese designed, owned and operated technology. It could be a “Trojan horse” used to threaten the U.K at a time of critical disagreement or conflict, he said. …
The U.K. government agreed to pay 92.50 pounds for every megawatt-hour of electricity produced from Hinkley Point for 35 years, about twice the current market rate. That contract has been widely criticized after data published on a government website last month showed this subsidy could cost more than 30 billion pounds.

Excerpts from Is China’s Role in Hinkley Point Really a Security Threat?, Bloomberg, Aug. 5, 2016

National Security and Nuclear Industry

[A third nuclear reactor is to be built in Flamanville, France  by Electricité de France (EDF)]…Called Flamanville 3, is likely to become the focus of international attention because it is the model for an imminent expansion across the channel…EDF has agreed on October 21st agreed with China General Nuclear Power Corp (CGN), a state-owned entity, to build two reactors of the same design in south-west England called Hinkley Point C. EDF will own two-thirds of the project and CGN a third. The plant in Somerset is supposed to open by 2025, after construction that is forecast to cost £24.5 billion ($37.8 billion)…

The history of Flamanville 3, where work began in 2007, indicates how difficult that might be. It was planned as a five-year scheme, but this month EDF, which is mostly state-owned, formally asked officials to extend the deadline to 2020. Its original budget of €3.3 billion has more than tripled, to €10.5 billion ($11.9 billion). Getting its new European Pressurised Reactor (EPR) into service is proving harder than expected. One problem is the troubled condition of Areva, another mostly state-owned French firm, which supplies reactor components. It reported losses of nearly €5 billion in March, because of soaring costs and long delays at the only other EPR being built in Europe, Olkiluoto 3, in Finland. Work began in 2005 but it will not open before 2018 at the earliest.

The main technical problem at Flamanville 3 concerns suspicions of high levels of carbon in the steel of a crucial component, the vessel, already installed under the dome of the new reactor. Replacing it now, if inspectors conclude it is too brittle, would be costly. In June the company also said it was double-checking the working of safety valves.

Meanwhile EDF’s financial burden grows. It boasts of €73 billion in global revenues, but faces a threefold strain. Demand for electricity is stalling in France, its main market—and, as problematic, the country plans to cut nuclear’s share of electricity generation to half of the total, by 2025, from 75%. Next, though details are not finalised, EDF will absorb the nuclear unit of troubled Areva. Last, it has to upgrade, or at least maintain, France’s stock of ageing reactors. Mr Lévy told French radio on October 18th that capital expenditure for that alone would be around €50 billion.

No wonder ratings agencies judge that EDF’s financial prospects are secure only because of its state backing.  EDF’s prospects, indeed those of any nuclear company, depend on the backing of politicians who want to preserve nuclear expertise and jobs at home.

EDF’s Nuclear Ambitions: French Lessons, Economist,Oct. 24, 2015, at 63

Nuclear Industry: France, Russia and China

[Regarding the French nuclear company Areva] its newest product, the expensive European Pressurised Reactor (EPR), has encountered more than the teething problems common to all big industrial projects. A plant in Finland is almost ten years behind schedule and almost three times over budget: Areva has had to write off billions as a result….Two reactors in China and the only new-build in France, at Flamanville, are also running late. EDF played an important role in managing the Chinese and French projects.

Besides criticism for slack project management, Areva and EDF (Electricite de France) have been questioned over technical standards. The steel in the main reactor vessel at Flamanville is faulty, the Nuclear Safety Authority said in April 2015. EDF disputes the finding and, with Areva, has started new tests. The news added to growing disenchantment in Britain with an agreement, not yet firm, that expensively entrusts the construction of a power station incorporating two Areva EPRs to a consortium led by EDF.  It seems unlikely that Areva will find many more foreign takers for its existing reactor…

[S]ome of Areva’s rivals are racing ahead. Rosatom, a Russian nuclear firm, has built up a fat order-book. Keen pricing, generous financing and relaxed technology transfer help, though Western sanctions do not. China’s two reactor-builders, CNNC and CGN, are peddling their own new design, Hualong One; in February CNNC signed a preliminary agreement to supply a reactor to Argentina.

Areva has little reason to hope for a surge of new orders at home. France’s 58 reactors are elderly but EDF, which operates them, plans to revamp rather than replace them…A new law set to come into force this summer, pledging somehow to cut France’s dependence on nuclear power from 75% to 50% of its electricity needs by 2025, will make Areva’s prospects even bleaker.

Excerpts from France’s nuclear industry: Arevaderci, Economist, May 23, 2015, at 53.

Indigenization of Nuclear Energy: China

China General Nuclear Power (CGN), a state-owned enterprise (SOE) that is the country’s largest nuclear firm, is planning to float shares on the Hong Kong stock exchange on December 10th. Market rumours suggest it will raise well over $3 billion. Dealogic, a research firm, reckons this is likely to be the biggest listing in Hong Kong as well as the largest utility IPO globally so far this year.

Some see in the flotation a harbinger of a nuclear renaissance. If true, this would bring cheer to a gloomy industry. The shale-gas revolution has undercut the economics of building new nuclear reactors in North America. And since the deadly tsunami and nuclear fiasco at the Fukushima site in Japan nearly four years ago, confidence in this technology has waned in many places. Germany, for example, is getting out of nuclear power (see article).

China put a moratorium on new plants after that accident too, but the boosters have now prevailed over the doubters. The State Council, the country’s ruling body, wants a big expansion of nuclear power along the country’s coast to triple capacity by 2020 (see map). This plan is not as ambitious as before Fukushima, but Moody’s, a credit-ratings agency, nevertheless calls it an “aggressive nuclear expansion”. Some analysts look beyond 2020 and predict an even bigger wave of nuclear power plants will be built in inland provinces, giving a boost to this type of energy worldwide….One factor that could slow growth is cost. In the past Chinese governments were happy to throw endless pots of money at favoured state firms in industries deemed “strategic”. Times are changing, however. Economic growth is slowing, and the government must now deal with massive debts left over from previous investment binges. Since the export-oriented and investment-led model of growth is sputtering, officials may soon be keen to boost domestic consumption rather than merely shovel subsidised capital at big investment projects.

And it is not just that China may—and should—be starting to pay attention to the true cost of infrastructure projects. Rapid technological advances are also making low-carbon alternatives to nuclear power appear more attractive. Bloomberg New Energy Finance, an industry publisher, forecasts that onshore wind will be the cheapest way to make electricity in the country by 2030. Though coal will remain China’s leading fuel for some time, Bloomberg’s analysts think that renewables could produce three times as much power as nuclear in the country by that year.

What is more, as a latecomer, China had the chance to standardise designs of new nuclear plants to gain economies of scale and minimise risk. But rather than build copies of safe and proven designs from Westinghouse of America or Areva of France, it is insisting on “indigenisation”. This approach is in line with China’s desire to create national champions in key industries, as it has in high-speed rail.

Excerpts from Nuclear power in China Promethean perils, Economist, Dec. 6, 2014, at 75