Domestic power equipment maker Guangdong Macro Co said on June 1 it will set up a venture in South China with France's Areva, the world's biggest maker of nuclear reactors, with total investment of two billion yuan (US$262 million).

Under the agreement, a unit of Areva will invest 745 million yuan in the venture, capitalized at 1.49 billion yuan, while Sunten, a subsidiary of Guangdong Macro will inject its key operating assets, Shenzhen-listed Guangdong Macro said in a statement.

It said the venture, Areva-Sunten Electric, which still needs the approval of board members, shareholders and the Chinese government, will make power transmission equipment.

The tie-up would help ease the capital shortage of Guangdong Macro and improve its profitability, the statement added.

Areva has been active in investing in China's nuclear power sector. In February, it won a US$5 billion deal to build two nuclear power plants in Guangdong Province, slated for completion by around 2016.

Guangdong Macro, best known for its namesake water heater, booked 48.97 million yuan net profit in 2006, reversing a net loss of 146.59 million yuan a year earlier, as it focused on the production of power equipment in response to robust market demand.