China’s nuclear power industry has been suspended for almost one year because of the Fukushima accident.  However, it will restart soon as the two plans—‘Nuclear Safety Plan’ and ‘Nuclear Power Plan’ are going to be launched in March of 2012, reported by Xiangcai Securities.

The essential conditions to ensure a successful restart and development

Xiangcai Securities is quite positive on the nuclear power industry in the first half of 2012. The two plans are regarded as an essential step towards a successful restart.

The ‘Nuclear Safety Plan’ encompasses pre-requisite conditions to ensure nuclear safety. On March 16, the State Council was determined to conduct an overall review on current nuclear facilities and required related departments to draw up the ‘Nuclear Safety Plan’ and improve the ‘Nuclear Power’s Long and Middle Term Plan’. However, before approving the ‘Nuclear Safety Plan’, approval for new nuclear power projects was suspended. Thus, the ‘Nuclear Safety Plan’ is regarded now as a pre-requisite to the safety of nuclear recovery.

‘Nuclear Power’s Long and Middle Term Plan’ (aka ‘Nuclear Power Plan’) are requirements to ensure the progress as it resumes and to guarantee future nuclear developments. The first edition of the plan was approved by the State Council in October 2007. One of its most important contents was nuclear power’s installed capacity in 2020. With nuclear power’s rapid development from 2008 to 2010, the planned 40GW in ‘Nuclear Power Plan’ will be achieved by 2015. Consequently, the installed capacity in 2020 has to be re-regulated and the plan has to be improved. The installed capacity is closely related to nuclear investment implicated in the “twelfth five-year plan”, so the ‘Nuclear Power Plan’ is regarded as a crucial and sufficient condition of nuclear recovery. 

Considerations on the Recovery Time

At the end of 2011, the Ministry of Environmental Protection passed the draft proposal for the ‘Twelfth Five Year Plan and 2020 Objective for Nuclear Safety and Radioactive Pollution Prevention’ (‘Nuclear Power Plan’ for short) and now the policies are submitted the State Council for approval. In consideration of the time frame for improving nuclear safety plan’s associated regulations, March will be the best time for releasing the nuclear safety plan. Regarding the ‘Nuclear Power’s Long and Middle Term Plan’, it was initially released in October of 2007 which was the beginning of the “Eleventh Five Year Plan” period. Considering the great pressure on emission reduction, the revised nuclear power plan could be released in March or April, about half a year ahead of the beginning of the ‘Twelfth Five Year Plan’. In March, the NPC and CPPCC will be held. Hence, March will be the ideal time to release the nuclear power plan.

The nuclear power’s capacity amount in 2020 has been disputed for quite a long time. There are three figures mentioned since the beginning of 2011, 80 GW, 70 GW and even 60GW.

Xiangcai Securities predicts the installed capacity will be probably 70 GW. President Hu Jingtao said at the UN climate change summit ‘China will try to raise the proportion of non-fossil energy in the total primary energy to around 15% in 2020’. To meet the 15% proportion in 2020 requires nuclear power to be 80 GW, wind power 200 GW, conventional hydraulic 330 GW, solar power 50 GW and the biomass energy 30 GW. If nuclear power decreases 10 GW, it is the equivalent of increasing 40 GW wind power or 22.5 GW hydraulic power or 50 GW solar power. It will exert great pressure on other energy power. Seen from the current construction of wind power, hydraulic power and solar power, no one of them can undertake the pressure of nuclear power’s decrease.

Investment should focus on equipment

The investment in equipment (including nuclear island and conventional island equipment as well as auxiliary equipment) takes up to 51% of the total construction of a nuclear power plant. The rest of the investment, 49%, is mainly targeted at design and engineering. In taking the full cycle of investment in a NPP, the construction cost is around 57% and the operation cost is around 43%. Suppose 70 GW is the future target, the investment from 2012 to 2015 will reach 82.9 billion RMB if taking the former investment for reference. 42.26 billion RMB will invest in equipment.

The parties who can benefit from a NPP are equipment manufacturers, NPP designers, NPP constructors, fuel suppliers and NPP operators. Seen from the investment perspective, the equipment manufacturers are more worthwhile to invest in because many of them have gone public. As for other parties, the NPP designers are basically monopolized by the Chinese nuclear power design institutes and several foreign corporations; the NPP constructors is monopolized by CNNC Engineering Company; the fuel suppliers and NPP operators are mainly divided by CNNC and CGNPC. Although other companies like CPI got the operation license and China Huaneng and Datang have shares in some NPPs, the monopolization is not broken yet. Hence, the investment focus rests with equipment.

Source: Xiangcai Securities