Move to boost financial, technical competitiveness

Updated 2017-03-21 09:01:04 Global Times

Share prices of the listed arms of China National Nuclear Corp (CNNC) and China Nuclear E&C Group (CNEC) gained ground on Monday in reaction to news over the weekend of a merger.

Experts said the planned merger, following a series of such deals by centrally administered State-owned enterprises, will boost the companies' strength via consolidation of upstream and downstream industries and boost China's nuclear exports.

SUFA Technology Industry Co and China National Nuclear Power Co, two listed arms of CNNC, saw their share prices rise 10 percent daily limit and 1.95 percent on Monday, respectively.

Shares of China Nuclear Engineering Corp, the listed arm of CNEC, rose 3.42 percent.

The three listed companies said in separate stock filings Monday that they received notices from their parent companies on Friday about a planned merger, but they said the strategic reorganization is still in the planning stage and the merger won't affect their current businesses.

CNNC, China's only exporter of nuclear power plants, has already sold seven power units and eight reactors to seven countries and is in talks with more than 40 countries, according to the company.

The company has been exploring business opportunities in nuclear power markets along the “One Belt, One Road” initiative, a China-proposed plan to boost trade and investment across Asia, Europe and Africa.

CNEC is the builder of all nuclear power reactors in service and under construction in the Chinese mainland, and it has competed successfully the construction of Phase I and Phase II of the Chashma nuclear power plant in Pakistan, said a statement on the company's website.

In addition, CNNC is building a nuclear power plant using the nation's domestic Hualong One third-generation nuclear technology in Karachi, southern Pakistan.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said the move could be read as an effort by the government to boost the nuclear industry's export strength.

“In overseas markets, the client attaches importance to the overall strength of the bidder, and having the merger as it is now planned, (will give) the merged company a better chance in the international bidding process as the merger fosters both technology and cost management capability,” Lin told the Global Times on Monday.

Since 2014, the Chinese government has merged some of the country's leading State-owned industrial giants in the shipping, nonferrous metal, construction, and steel sectors. Some of the mergers - such as that of bullet train makers CSR Corp and China CNR into CRRC Corp - are seen as moves to boost the sector's ability to win deals abroad.

Wu Chenhui, a Beijing-based independent industry analyst, told the Global Times Monday that the companies to be merged this time don't compete with each other in their products and services, and a merger will create a conglomerate covering the whole industrial chain.

“Global business competition is not always about business. And having a giant conglomerate helps,” Wu said, noting that one typical example is Japan, where a conglomerate operates businesses across a wide range of sectors.

Lin said the merger trend has now extended to the nuclear power sector, partly to solve the issue of overcapacity in the sector as domestic demand for nuclear plants could not absorb the rapid growth in supply.

“Due to the high costs of nuclear plants and sensitivity related to nuclear power, and the relatively low level of recognition on the global market, Chinese companies still face an uphill battle in nuclear technology exports,” Lin said.

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