29 September 2014

Seven years after a technology transfer agreement was signed with Chinese customers, Westinghouse looks forward to the next phase of their cooperation. At a trip to China in April 2014, I learned more. By Will Dalrymple

Westinghouse and China's State Nuclear Power Technology Corp (SNPTC) are building the first four AP1000 nuclear power reactors, at Sanmen in Zhejiang province and Haiyang in Shandong province, to start up between 2015 for the lead unit (Sanmen 1) and 2016 for Haiyang 2.

Westinghouse, Shaw, SNPTC, Sanmen and Shandong Nuclear Power Companies, and China National Technical Import & Export Corp (CNTIC) signed construction contracts in 2007. Westinghouse and Shaw have an engineering, procurement, construction and commissioning contract. In December 2007, the US and Chinese governments signed an inter-governmental agreement for construction and technology transfer. Further contracts were signed by Westinghouse and SNPTC in 2010 and 2011, according to the World Nuclear Association.

As a result, as reactor design information passes to SNPTC and then on to the Chinese supply chain, over time the design becomes localized. SNPTC estimates that the Chinese supply percentage is 55% over all four units; for Haiyang 2 that figure rises to 70% (see table).

There are eight additional AP1000 units ready for construction. The scope of the role that Westinghouse might play in these follow-on AP1000s remains under negotiation, although I understand that Westinghouse has already signed an I&C contract with SNPTC.

Tim Collier, Westinghouse vice president and managing director for China, said that its corporate experience has been of continued collaboration even after technology transfer. "For example EDF is one of our largest customers today, despite the fact that we transferred the technology to what was Framatome ... and we expect that the same will be true in China." (In 2002, Westinghouse won a contract to supply up to 20% of EDF's fuel demands for its 58 PWRs).

He said that the company is currently negotiating its role in follow-on plants: "We are working on various stages of discussion with plant owners to define the role of each of the follow-on AP1000 units. We are also working with EPC and component suppliers to define their assistance and support to implement AP1000 projects."

In a 2013 memorandum of understanding, Westinghouse and SNPTC established a joint venture company, SNPTC-WEC Nuclear Power Technical Services, for both domestic projects, and work toward international projects as well.

When the MOU was set up in 2013, executives were quoted as saying:
"This joint venture also provides the opportunity for collaboration in new markets. We expect to provide new opportunities for business both within and outside of China. By forming this joint venture, we have a mechanism for delivering our goods and services together to a broader range of customers, delivering mutual business success," said Roderick.

"This joint venture is the latest case to show that Westinghouse and SNPTC are strategic partners in providing products and services that will help future generations in China and elsewhere around the world with safe, clean and reliable electricity," said Wang Binghua, Chairman, SNPTC.

At a AP/CAP supplier symposium held at the end of May, Wang Binghua, SNPTC chairman, said that it had approved 109 qualified suppliers (domestic and foreign) in six fields: machinery, electrics, materials, engineering, I&C, operations.

Discussions about follow-on AP1000 projects are also tied up with the CAP1400, a larger (1530 MWe) version of the AP1000 (1250 MWe) designed in China and with independent intellectual property. This reactor design has not yet received approval to start construction, but SNPTC expects a decision in 2014 with grid connection in 2018. It is intended for use both inside China and out.
I understand that within China, CAP1400 projects are unlikely to involve extensive Westinghouse participation.

Collier was realistic, but positive, about Westinghouse's prospects for domestic CAP1400 projects. "The goal of the development of the CAP1400 design is localization and local capabilities. We believe that Westinghouse brings value to CAP1400 projects without sacrificing the ability of local firms to deliver." He added that it has not had definitive talks, since the design is under review by the regulator and a construction permit for the demonstration site has not yet been issued.

Even farther in the future, there are plans to market the CAP1400 outside China, at a lower price than the AP1000, I understand.

But Collier said that Westinghouse still has a stake in CAP1400 projects for export. "I would say that US-China agreements on exports of US technology will play a role in the discussion if there are to be projects outside of China."

SNPTC said, "Since the signing of AP1000 project construction and technology transfer contracts, SNPTC and Westinghouse are continuously extending and deepening the mutual cooperation relationship, and our cooperation is always based on the laws of US and China and the contracts between our two companies. Under the joint effort of both parties, a sound cooperation relationship is maintained and achievements have been made in areas of technology R&D, design and engineering management etc. The cooperation is making an important role in China and US's nuclear energy development and will not be interfered with."

Another factor that remains unclear is the effect on negotiations of the lawsuit launched by the US Attorney's Office for the Western District of Pennsylvania against five Chinese computer hackers employed by China's People's Liberation Army, alleging that they stole trade secrets from US companies, including Westinghouse. The lawsuit was announced in May, after my trip to China. Since it is hard to believe that China would send these people to the USA to stand trial, the lawsuit seems to be mainly a symbolic gesture, demonstrating the US's strong feelings on the subject.

The indictment claims that conspirators stole at least 1.4 GB of data, including trade secrets and proprietary information about the AP1000 contract with SNPTC, from Westinghouse servers in attacks in 2010-2012. It alleges that two sorts of information were stolen: design details and strategic secrets.

The investigation was conducted by the FBI. Its director, James B. Comey, said: "For too long, the Chinese government has blatantly sought to use cyber espionage to obtain economic advantage for its state-owned industries."

Both Westinghouse and SNPTC have declined to comment on the claims.

AP1000 chinese supply chain

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