China will buy 4 nuclear reactors from US company

By Keith Bradsher (New York Times)
Updated: 2006-12-18 09:31

Hong Kong -- China will buy four Westinghouse nuclear reactors in a deal that shows the continued attractiveness of American technology, but may also stir worries in Washington that the United States is selling its competitive advantage one industry at a time.

Ma Kai, the minister of China's National Development and Reform Commission, and Energy Secretary Samuel W. Bodman of the United States signed a memorandum of understanding for the reactors in Beijing on Saturday. The deal calls for the state-owned China National Nuclear Corporation to buy the reactors from Westinghouse Electric, which the Toshiba Corporation, based in Tokyo, bought earlier this year.

Neither side announced a value for the reactors. But outside analysts have suggested the total price tag may be US$5 billion to US$8 billion.

Michael R. Wessel, a commissioner of the United States-China Economic and Security Review Commission, which was created by the US Congress to review bilateral relations, expressed concern on Sunday that based on the broad outlines of the deal, "it appears they are doing what other companies have done, which is to transfer the technology upfront."

Such deals limit the long-term benefits to the United States, while clearly helping China, he said. Chinese companies have been acquiring technology from Western companies in the last year for everything from aircraft assembly to car design and engine manufacturing.

Stephen R. Tritch, the chief executive and president of Westinghouse, said in a statement that half the value of the contract would be done in China, but that the work would nonetheless support 5,000 design, engineering and manufacturing jobs in the United States. Mr. Tritch said that the deal would also make it possible, however, for China to build future nuclear reactors with less help from overseas.

"Westinghouse, our US supplier base and our consortium partners will continue to benefit much as we do now in the Republic of Korea, where recent new plant awards from that country's maturing industry still provide about $100 million per plant in US scope," he said.

Bodman said at the signing ceremony that "the Chinese were very demanding." But he did not elaborate on whether he was referring to the extent of technology transfers, frequently a sticking point in the past, or to other issues.

Vaughn Gilbert, a Westinghouse spokesman, said that the company had successfully licensed technology to France for many years and believed that it could properly manage the transfer of technology to China.

Thomas Donnelly, another member of the United States-China commission, said that civilian nuclear reactors had little military value for China.

Westinghouse prevailed in the bidding over Areva of France and AtomStroyExport of Russia. China excluded General Electric because it makes boiling water reactors, instead of pressurized water reactors.

Ruth A. Shapiro, the executive director of the Asia Business Council, said that China was in an excellent position to play multinationals against each other to obtain the most advantageous terms.

"We can be sure all of them offered great deals, given how competitive the supply side is and how thin the demand is," she said.

Westinghouse and its rivals still have a chance at further orders. The International Energy Agency predicted last month that China's nuclear power generation capacity would increase by 9,000 megawatts by 2015, to 15,000 megawatts. The four reactors announced on Saturday, which are to be completed by 2013, will each have a capacity of 1,100 megawatts.

However, the transaction is not big enough to make much of a difference in China's reliance on coal, energy specialists said.

The International Energy Agency projects that China will add 331,000 megawatts of coal-fired generating capacity by 2015, for a total of 638,000 megawatts. 

Bodman announced separately in Beijing that the United States would work with China to find ways to make coal-fired plants more efficient, and to capture and store the carbon dioxide that they release.

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