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China National Nuclear Power Co. is planning the country’s largest-ever initial public offering on the Shanghai Stock Exchange in order to finance the development of nuclear power projects.
China’s top nuclear power producer, China National Nuclear Power Co., is planning a public listing on the Shanghai Stock Exchange to finance the development of new nuclear power projects. While the expected size of this initial public offering (IPO) is not available, the money raised from the equity listing is to be applied towards funding five nuclear power projects worth $27.3 billion.
Resuming longer-term plans
In March 2011, China suspended permits for new nuclear power plant projects pending a new comprehensive safety plan. Nuclear power generation was maintained at reactors that were already in operation at the time, while construction schedules continued without delays for approved nuclear power plants.
By the end of May 2012, China had advanced toward resuming its nuclear power program with preliminary cabinet approval of its post-Fukushima nuclear safety plan. A nine-month safety inspection of all current nuclear operations, including those under construction, indicated that most of China’s nuclear power stations meet both domestic regulations and International Atomic Energy Agency standards.
As of last month, China had 14 nuclear power reactors in operation, more than 25 under construction, and more about to start construction soon. These numbers represent as much as 35 percent of total proposed and planned reactors in the world.
Impact
The public listing is relevant for the uranium mining industry because of the commitment to nuclear power that it represents. In relative terms, the market capitalization of this IPO is expected to surpass the largest enterprise previously launched in the Chinese market, the Agricultural Bank of China.
Uranium resources in Canada in focus
Following the February meeting between Chinese and Canadian leaders, the Canadian uranium industry specifically could benefit, as this growing Chinese market should mean an additional opportunity to market its uranium. In general, junior exploration companies should benefit from growing capital investments and the potential to stimulate more appetite for merger and acquisition activity.
Bhagyesh Dash of Singapore-based Bromius Capital indicated a robust demand for quality resources, commenting to Uranium Investing News, “Canada is a favored destination for investment, and uranium is a strategic commodity that a number of these groups are interested to invest in. With China gearing up for a major expansion in its nuclear power program, this will mean that not just the Chinese state-owned enterprises, but also private Chinese groups will increase efforts to secure uranium supplies through offtakes and direct investments in uranium projects.”
Two-pronged strategy
Dash indicated that from state-owned enterprises, “the strategy is a clear two-pronged one: in the short term secure supplies from established producers and in the long run seek to secure direct supplies because they are well aware that there is a long gestation period in taking a uranium project from exploration through to ultimate production, especially in the developed world. So, in the short term there should be no disruption to status quo with long-term contracts, but certainly over a 10 to 20-year time frame, we should see changes to how the Chinese and Koreans in particular source their uranium.”
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.