Power Investment Corp is merging with the State Nuclear Power Technology Corp, as Beijing drives consolidation in its rapidly expanding nuclear power sector with the aim of eventually exporting reactors.
The Chinese power producer currently controls about a tenth of China's nuclear power market, while the State Nuclear Power Technology Corp was formed in 2007 to handle nuclear technology transferred from U.S.-based Westinghouse Electric Co..
A merger between the two would create a firm with total assets of more than 600 billionyuan ($96 billion), industry experts estimate.
"The merger will help them expand in China, and the overseas market in the long run," said Francois Morin, Beijing-based China director of World Nuclear Association.
Shanghai Electric Power Corp Ltd, the parent of China Power Investment, said in filing to the Shanghai exchange that it had received notice from China's Assets Supervision and Administration Commission on the merger.
The State Council, China's cabinet, said in January that it would aid the overseas expansion of Chinese firms, in particular in the rail and nuclear power sectors, raising hackles with some trading partners who fear it signals another wave of subsidized Chinese exports.
China, which now primarily provides financing and construction services to nuclear power projects overseas, is expected by some experts to start exporting reactors after 2020 and become a major exporter by 2030 when it has fully digested foreign technology and developed its domestic industry.
The global nuclear market is currently dominated by firms such as France's Areva, Russia's Rosatom State Nuclear Energy Corp and Japan's Toshiba Corp, which controls Westinghouse.
TOP NUCLEAR POWER MARKET
China Power Investment, parent of Hong Kong-listed China Power International Development, is one of China's top five independent power producers with total installed capacity of around 90 gigawatts, a fraction of which is nuclear power.
The tie-up is logical given China Power Investment's relatively weak nuclear expertise but financial muscle, said analysts.
Consolidation of the nuclear sector is seen as a key to Chinese companies acquiring the scale to compete abroad.
Similar mergers are being contemplated for China National Nuclear Corporation and ChinaGeneral Nuclear, which could lead to the development of an export market for their joint reactor design, the Hualong I model.
China General Nuclear is the state-owned parent of CGN Power , which raised $3.2 billion in an initial public offering in Hong Kong in December. The group is currently the largest nuclear power producer in China with a 44 percent share of the market, followed by ChinaNational Nuclear Corporation with 18 percent and China Power Investment with 10 percent, according to Jefferies research report.
Unlike some other industries where China has tried and failed to use foreign technology transfers to create domestic champions, analysts say China has been successful at trading access to its growing nuclear market for access to key technologies from foreign companies.
Westinghouse Electric Co has already handed over most of the intellectual property for its AP1000 reactor design to the State Nuclear Power Technology Corp.
With 22 reactors in operation, and a further 26 under construction, China is the world's largest nuclear power market. It aims for an installed nuclear power capacity of 58 GWs by 2020 from the current 18 GW, under a programme estimated to cost $100 billion.