For 30 years, France has been the dominant player in the global nuclear industry, with Electricite de France (EDF) the world’s biggest operator of reactors and Areva a key builder of those facilities. The nation’s nuclear sector employs 125,000 people, the same as aviation – two of the few industries in which France remains a global leader.
But now that dominance is under threat from China. While its technology is still behind that of France, Beijing provides the finance essential to winning large contracts — something that Paris cannot afford. And, since it is one of the world’s biggest nuclear markets, French companies have no alternative but to sell to China, through partnerships that inevitably mean a transfer of technology.
French companies fear that it is only a matter of time – perhaps just four or five years – when Chinese companies will win major contracts abroad on their own and no longer need French partners or technology.
Beijing set two landmarks this year. The China General Nuclear Power Corporation (CGN), based in Guangzhou, made a solo bid for a 4,500-megawatt station for the Turkish government. Though the initiative did not succeed — Ankara awarded the contract in May to a French-Japanese alliance led by Areva and Mitsubishi Heavy Industries, as Tokyo offered a large loan – it marked the first time a Chinese firm had bid alone for a major foreign contract in the nuclear field.
Then, in October, the British government signed a contract with EDF, Areva and two Chinese companies to build two 1,600-megawatt European Pressurised Reactors (EPRs) at Hinckley Point in the west of the United Kingdom, at a cost of 16 billion British pounds.
CGN and China National Nuclear Corporation would take a combined 30-40 percent stake in the consortium, Areva 10 percent and EDF the rest.
They will be the first nuclear plants operated by a Chinese company in Europe, which has the highest safety and environmental standards in the world. EDF turned to Beijing after its initial partner, Centrica of Britain, pulled out citing cost over-runs. Total installation costs are estimated at 14 billion pounds; it will produce about seven percent of Britain’s total electricity needs and operate for 60 years.
Visiting Beijing in October, British Chancellor of the Exchequer George Osborne said that, in future, Chinese nuclear firms could hold majority stakes in British plants.
But, for now, British public opinion would not have accepted the idea of a Chinese company building and operating a nuclear plant on its own, out of safety concerns. A joint project with EDF and Areva gives the Chinese partner invaluable experience, technology and credibility.
Currently, China’s only sole foreign deal is in Pakistan. In the summer of 2013, it signed a contract to build two 1,000-megawatt reactors in Karachi. Since Pakistan has not signed the Nuclear Non-Proliferation Treaty, no other country bid for the contract. So, while there was no competition, the project gives the Chinese firms valuable experience and credibility abroad.
Next on its radar are South Africa and South America. Zheng Dongshan, vice-president of CGN, spent nearly two months this year in South Africa preparing a bid for its next nuclear station. Meanwhile, China has signed an agreement on nuclear cooperation with Argentina and one of its nuclear firms has opened an office in Rio de Janeiro.
One of Beijing’s trump cards is abundant capital. Countries that decide to build nuclear plants require finance running into billions of dollars; they need the vendors to provide loans to cover a large part of the cost. Without them, they cannot sign the contract.
Most western countries, including France, are unable to grant such large loans. With their enormous foreign exchange reserves, China and Japan can.
EDF and Areva are long-time partners with the two Chinese firms. EDF has worked for 30 years with CGN to build and operate nuclear plants in Guangdong. EDF and CGN have worked on a new reactor of 1,000 megawatts, for export to the world market.
For both companies, China is a partner and a competitor. Through the partnerships, the two Chinese firms acquire technology which they use in their own reactors. Their ability to learn and use the technology is faster than the ability of the French companies to innovate and stay ahead.
By 2020, China’s nuclear power capacity will be the same as that of France. It is only a matter of time when, aided by the ample capital of their government, Chinese companies will be able to secure foreign contracts on their own – and France risks losing its crown.