China accord may boost fortunes of US nuclear vendors

Commercial nuclear reactor makers in the United States are celebrating the successful completion of President Reagan's mission to China. The signing Monday of a diplomatic agreement to agree on the sale of US nuclear technology to China is the first step toward opening up a tremendous potential market for domestic manufacturers of commercial reactor technology. It is one of the most positive developments for the beleaguered reactor vendors since the accident at Three Mile Island five years ago.

''The Chinese have an enormous potential appetite for electrical power. They have virtually an entire country in need of electrification,'' comments Paul Turner of the Atomic Industrial Forum, an industry trade association. While mainland China is the fourth largest consumer of energy in the world, its per capita consumption is one-quarter the world average.

After more than a decade without any new domestic orders, and a sharp drop-off in foreign orders since 1977, US reactor vendors view it as a significant opportunity to compete for the 10 to 12 nuclear power plants that the Chinese are considering.

''Although we [the domestic industry] have 50 plants under construction, the lack of recent orders means our front end is empty. So any new orders would be significant,'' Mr. Turner says.

Obtaining an order to supply the Chinese with a turnkey nuclear reactor system ''would do a lot to help our nuclear group. It isn't something which will make or break our organization. But it would be a real shot in the arm,'' adds Nat Woodson, general manager of the nuclear operations division of estinghouse Electric Corporation.

Of course, the current agreement is only the first step toward opening the Chinese market for companies like Westinghouse and General Electric. The next step is the drafting and signature of a bilateral accord, which must sit before Congress for 60 working days.

Then there is the crucial matter of financing. In multibillion-dollar construction projects of this sort, the governments of companies competing for contracts all offer subsidized financing. Often, the financial package is important as the price or technical aspects of such a bid. Thus, the competitiveness of the terms that the US Export-Import Bank extends to the Bank of China for the purchase of nuclear plants will have a major effect on the prospects of the US reactor vendors, who will be competing with French, West German, and Japanese companies.

''There is no doubt that this will be a highly competitive market,'' says Hugh Hexamer, spokesman for the General Electric Company. US firms have been negotiating directly with the Chinese in anticipation of the new accord. But until a diplomatic agreement could be reached, the discussions were largely hypothetical.

Currently, the Chinese are actively considering two nuclear power-plant projects. The first is a small, 300-megawatt plant near Shanghai, designed and constructed by the Chinese themselves. The second involves two larger, 900 -megawatt units near Hong Kong with reactors to be supplied by the French and steam generators provided by a British company.

Although foreign companies have a head start in China, US vendors say they believe they will have a good chance.

''The US is the leading technological base of commercial nuclear technology, so this gives us some advantages,'' Mr. Hexamer argues.

In the short term, the Chinese have a crucial need for electricity to continue their program of industrial growth. This means that they will probably rely on foreign suppliers for turnkey power plants. But, over the long haul, Chinese officials clearly want to acquire the capacity to design and build their own reators.

''If our experience with other countries holds true, we will probably begin to see increasing local content in the last four of the dozen power plants the Chinese are talking about,'' says Westinghouse's Mr. Woodson.

As a result, agreements on the sale of computer software and training may ultimately prove as important as the sale of reators themselves, nuclear industry representatives say.

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