France's Areva wins $5 billion nuke deal
BEIJING (Reuters) - French state-run company Areva (CEPFi.PA) has unexpectedly agreed a $5 billion deal to build two nuclear power plants in China weeks after a U.S. rival appeared to have won a competition that dragged on for more than two years.
Beijing's surprise expansion of the tender to six plants from an original four underlined both the country's voracious appetite for power and its diplomatic skill in satisfying rival suitors for its tempting markets.
The agreement covers a total of 3.2 gigawatts of generating capacity in southern Guangdong province, an official at the government-backed China Nuclear Society told Reuters on Tuesday.
Final commercial details have yet to be hammered out, but the two reactors are slated for completion around 2013, he added.
The deal was as much political as economic, analysts said, as Beijing struggled to smooth troubled relations with the United States without alienating long-standing friend France.
"I don't think technology is the key concern here. It's a political balancing act. China doesn't want to upset the French since they were the earliest builders of reactors here," Yang Fuqiang, head of China office for U.S.-based Energy Foundation.
Beijing appeared to have snubbed France in late 2006 when it awarded contracts for four reactors in coastal China to U.S.-based Westinghouse Electric, now owned by Japan's Toshiba (6502.T).
Instead it added two reactors to the tender, but kept the expansion quiet while negotiating terms for the Yangjiang plant which will use European Pressurized Reactor (EPR) technology, the official, who declined to be named, told Reuters.
"Deals like this are more political than economic," he added.
Westinghouse will build two reactors in the east coast province of Shandong and two in Zhejiang province, bordering Shanghai.
Also due for completion in 2013, they will have total capacity of 4 GW. That deal is worth around $6 billion to $7 billion, the official said.
The Areva deal would have no impact on Westinghouse's plans to build these nuclear plants, a Westinghouse spokesman said.
NUCLEAR BOOST
China has also set up a special government-run company to handle the transfer of nuclear technology, a key component of both agreements, he said.
Beijing plans to spend some $50 billion on building around 30 nuclear reactors by 2020, raising its installed nuclear capacity to 40 GW -- nearly enough to power Spain.
That would be around 4 percent of all power, compared with only about 2.3 percent at present but still far behind three-quarters in France or one quarter in Japan.
It has nine working reactors, but has been sucking up technology from around the world -- including Canada and Russia -- to boost a domestic industry that Beijing hopes will one day match national prowess in construction of coal plants.
Technology transfer was a key sticking point in negotiations for the reactors, which had dragged on since 2004, and China said in December it had chosen Westinghouse partly because of issues of self-reliance and localization of technology.
Areva has said in the past it would be willing to transfer technology, but a spokesman declined to comment on the deal.
"Discussions are ongoing, and we will not comment on the details of these discussions," he said.
Earlier this month, sources close to the situation had said that Areva would build the plants and that France's EDF (EDF.PA), the world's largest single producer of nuclear power, would provide engineering support.
An EDF spokeswoman said the group's position was unchanged from comments made last week. It had said it would hold technical meetings on nuclear plants with Chinese partner CGNPC in coming weeks and predicted closer cooperation in the next few months.
(Additional reporting by Marie Maitre in Paris, Lisa Lee in New York)
