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China National Nuclear Power Co. Plans $2.6B IPO

China National Nuclear Corp. (CNNC), a subsidiary of China National Nuclear Power Co., (CNNP) one of China’s three state-owned nuclear power developers, is planning its first IPO, intended to raise at least $2.6 billion.

CNNP's Shanghai stock market IPO listing could be the biggest on the mainland since the Agricultural Bank of China debuted in July, 2010. CNNP currently has 12 nuclear power projects, including operating nuclear power plants in Zhejiang and Jiangsu and others under construction or being planned in Fujian, Hainan, Liaoning, Zhejiang, Hunan and Henan. CNNP intends to use the money raised by the IPO to fund the construction of four plants containing a total of 10 reactors in Fuqing, Fujian, Sanmen, Zhejiang, Changjiang, Hainan and Tianwan, Jiangsu.

In its February, 2014 “China Analysis,” the U.S. Energy Information Agency noted, “At the end of 2013, China had 31 reactors with almost 35 GW of additional capacity under construction, almost half of the global nuclear power capacity being built. These plants are slated to become operational by 2017, more than tripling China's current capacity.”

Three years ago, in the wake of Japan's Fukushima Daiichi nuclear power plant accident, China suspended government approvals for new nuclear plants until safety reviews of all facilities were completed and the state council had approved a new safety framework. Construction resumed in October 2012.

CNNP is seeking to broaden its expertise base; in October 2013, Palo Alto-based Electric Power Research Institute (EPRI) announced that CNNP had joined two of its nuclear-related research programs. CNNP President Chen Hua remarked, “CNNP’s participation in EPRI will enhance our mutual understanding, and I’m convinced that CNNP will expand its engagement with EPRI soon to become a full member in all of its nuclear research programs.”

There is however, a potential question hanging over CNNP’s IPO; according to the World Nuclear Association CNNP’s parent company, CNNC, "combines military with civilian production, taking nuclear industry as the basis while developing nuclear power and promoting a diversified economy." CNNC’s “military production” and its relationship to CNNP makes CNNP’s nuclear power generation capacity potentially “dual use” technology, raising potential questions under the Non-Proliferation Treaty, which China has signed and ratified.

Chinese President Xi Jinping has proven his commitment to non-proliferation. When North Korean leader Kim Jong Un conducted his country's third nuclear test in 2013, Beijing temporarily ended top-level official visits with Pyongyang and implemented the UN sanctions on North Korea. In such a context, more transparency on the exact nature of the relationship between CNNC and CNNP would be useful, but in any case, given China’s projected electricity needs, the CNNP IPO looks headed for success.

By. John C.K. Daly of Oilprice.com

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