Compared with a 0-2GW p.a. capacity addition in 2007-13, we believe China’s nuclear installation is entering into a fast track. Based on the targeted 58GW of targeted nuclear installation set by the government for 2020E, China’s nuclear capacity will see a 20% capacity CAGR in 2014-20E, second only to the growth of solar (23%). While the 2019-20E actual capacity would be subject to the project approval in the next six to twelve months, the growth in 2015-17E is visible given the current construction schedule. We forecast a 9.5GW/10.9GW capacity addition in 2015/16, the highest in China’s history, and representing c.50% of the 2014E total capacity.  

Eoin Treacy's view

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The grey air that overhangs much of northern China in the winter months represents a drag for a country that has ambitions of creating a knowledge economy. If one is to depend on the productive capacity of an educated workforce then public health becomes an increasingly urgent priority. China’s nuclear capacity is growing impressively but from a low base. At only 2% of the energy mix compared to somewhere in the teens for most developed economies, there is significant room for additional growth and it can’t come soon enough for those breathing the polluted air. 

Huadian Fuxin rolled over and broke its progression of higher major reaction lows in December. It has rallied back to test the region of the MA over the last three weeks but will need to sustain a move above HK$4 in order to signal a return to demand dominance beyond the short term. 

It is worth considering that while China has been willing to expend capital on building test reactors for emerging technologies, the majority of new reactors coming online are generation II designs. The generation III EPR (Evolutionary Power Reactor) designs pioneered by Areva are facing cost overruns in a number of countries and even China’s are a year behind. China will eventually reap the benefits of having made the investment in developing technology but it is going to take decades.