Western firms tap China cash to bid for UK nuclear project

LONDON/FRANKFURT (Reuters) - China may soon have a major stake in one of the UK's biggest nuclear projects after two Chinese state firms teamed up with Western players to bid for a joint venture that plans a $24 billion (15.31 billion pounds) investment, industry sources told Reuters.

China, which sits on vast cash reserves and is keen to invest in foreign assets, has been expanding into Europe's energy and infrastructure sectors by buying stakes in firms such as Thames Water and Portuguese utility EDP (EDP.LS).

The British government wants to see new nuclear plants built, but cost overruns in the wake of the Fukushima nuclear disaster and the slowing global economy have made it increasingly difficult for Western developers to find the billions of dollars needed for these projects.

The Horizon nuclear project was put up for sale in March by German utilities RWE (RWEG.DE) and E.ON (EONGn.DE), who have come under pressure from Germany's decision to phase out all nuclear power in the aftermath of the Fukushima accident.

The Gloucester-based joint venture owns two nuclear sites in Britain, at Oldbury near Bristol and Wylfa on Anglesey, where it plans to build 6 gigawatts of new nuclear capacity with an investment of 15 billion pounds.

Japanese bank Nomura, which is acting for RWE and E.ON in the sales process, imposed a June 15 deadline for offers, which are expected to have come in at several hundred million pounds.

Nuclear reactor builders Areva (AREVA.PA) and Toshiba-owned (6502.T) Westinghouse have picked separate Chinese nuclear companies to help bid for Horizon.

"Areva and Westinghouse have both assembled consortiums of their own," said one source, who is familiar with the bidding process but who refused to be identified. Two other sources in the banking and consultancy sectors confirmed the bidders.

If successful in either of their bids, reactor technology developers Areva and Westinghouse would probably sell their stakes in the project to an experienced nuclear plant operator whilst ensuring their respective designs are used, experts said.

TEAMING UP

Westinghouse has teamed up with China's State Nuclear Power Technology Corporation (SNPTC), expanding their existing collaboration in China, to make a bid, while Areva has linked up with China Guangdong Nuclear Power Holding Co (CGNPC) to put forward a separate offer, the sources said.

Westinghouse, Areva and SNPTC declined to comment, and officials at CGNPC could not be reached for a reaction.

"The Chinese may see Horizon as a way of acquiring a relatively cheap option on developing nuclear capacity and expertise in Europe if the conditions are favourable," David Stokes, a director at consultancy Timera Energy, said.

Britain is trying to woo nuclear investors by reforming its electricity market in a way that guarantees a minimum price for producers of low-carbon energy, including nuclear power.

"The (UK) government is likely to welcome new interest from well capitalised Chinese utilities, particularly given an absence of other obvious strategic bidders," Stokes said.

Energy Minister Charles Hendry last month called Horizon's nuclear sites at Wylfa and Oldbury two of the most attractive sites in Europe to invest in new nuclear plants, adding that there had been strong interest in buying the joint venture.

Two other groups are also believed to have expressed an interest in Horizon, with Japanese-U.S. joint venture GE Hitachi (GE.N) a likely candidate, one of the sources said.

GE Hitachi refused to comment. It previously expressed interest in the UK nuclear market and said it planned to submit an application for design approval of its ESBWR reactor in the UK. [ID:nL5E7KF383]

Last year, SNPTC and Westinghouse extended by two years a partnership in China to build the U.S.-based firm's AP1000 nuclear reactor.

CGNPC chose Areva's EPR design for its Taishan nuclear power plant in China, and the two companies have founded an engineering joint venture in China.

Both the AP1000 and EPR designs have reached the final stages of regulatory approval in the UK.

In a separate project, French utility EDF (EDF.PA) and Areva, together with junior partner Centrica (CNA.L), are planning to build four EPRs in Britain, and a final investment decision for the first plant at Hinkley Point in Somerset is expected later this year.

(Additional reporting by Henning Gloystein in London, Jonathan Gould in Frankfurt, Caroline Jacobs in Paris and Wan Xu in Beijing, editing by Jane Baird)