CNNC calls itself core of China's nuclear strategy
China National Nuclear Corp (CNNC) is preparing to launch the first initial public offering of shares by a Chinese nuclear power generator.
The Ministry of Environmental Protection said last week it had approved the listing on the Shanghai stock market of CNNC, one of the mainland's two state-owned developers of nuclear power projects.
The plan is awaiting final approval by the China Securities Regulatory Commission, which oversees the mainland's stock markets.
In a report submitted to the ministry, the company did not specify how much money it intended to raise but indicated the proceeds would help finance five nuclear power projects now under construction. The firm estimates the combined construction cost at 173.5 billion yuan (HK$211.15 billion), equivalent to US$28 billion. The plants are located in Zhejiang, Fujian and Hainan provinces.
There has been speculation the listing could be the largest in the history of the mainland's equity markets. In 2010, Agricultural Bank of China raised more than US$22 billion on the Shanghai and Hong Kong stock exchanges.
But analysts say the US$28 billion figure is much too high, given that CNNC typically owns just a 50 per cent stake in the projects it develops. Those projects are usually funded 20 per cent by equity and 80 per cent by bank loans and corporate bonds. So, by that measure, CNNC is likely to raise only about 17 billion yuan.
Last month, CNNC already raised 3.5 billion yuan by issuing a 10-year bond to help fund the construction of the same five projects.
The company's heritage traces back to 1956, when China's Ministry of Atomic Industry was set up. Through several rounds of restructuring and reform, government and business functions were separated, and CNNC was formed to take over the commercial activities in 1999.
Wholly state-owned, CNNC has more than 100 business units and research institutes, employing a total of 100,000 people, mostly on the mainland. Of those, 36,000 are technical professionals.
The company was the mainland's largest operator of nuclear power projects until it was overtaken in operating capacity last year by Shenzhen-based state-owned developer China Guangdong Nuclear Power.
With the commissioning of the fourth generating unit of the Qinshan nuclear plant's second-phase development in Zhejiang province, CNNC regained its leadership position in April this year.
The firm's recent bond prospectus says CNNC considers itself to be the 'core of the nation's nuclear strategy ... shouldering both military weapon construction and civil power generation responsibilities'. The firm also has interests in mining, importation and processing of uranium, recycling of spent nuclear fuel and import and export of nuclear technology and products, including reactors. It has an investment arm that develops alternative energies such as wind and solar, as well as interests in coal mines, coal-fired power plants and projects to turn coal into chemicals such as polyethylene, which is used in industries from water pipes to packaging.
The firm has a Shenzhen-listed unit named CNNC Sufa Technology Industry, which makes industrial valves for the petroleum, chemical, metallurgy, electricity and nuclear power industries. It reported a net profit of 57.82 million yuan last year.
CNNC has controlling stakes in four operating nuclear power projects, with eight reactors and total generating capacity of 6.43 gigawatts. This compares with China Guangdong Nuclear Power's 6.12GW.
Projects under construction by CNNC and projects that have government approval to conduct preconstruction preparation work amount to a further 19.71GW.
In its bond prospectus, CNNC says it aims to more than double sales to over 100 billion yuan in 2015 from 44.7 billion yuan in 2010, and to further double sales to exceed 200 billion yuan in 2020.
The firm aims to control more than 16GW of operating nuclear generating capacity in 2015, rising to 28GW in 2020, which would give it about a 40 per cent share of the mainland's total capacity.
CNNC is also targeting a profit of over 10 billion yuan in 2015, although it did not specify whether that figure was before or after tax and whether it was total profit or profit attributable to shareholders.
It made an after-tax profit of 4.9 billion yuan in 2010, the latest full-year profit disclosed, of which 2.54 billion yuan was derived from its stakes in nuclear power projects.
The bond prospectus says CNNC recorded an unaudited net profit of 4.98 billion yuan on revenue of 30.5 billion yuan in the first nine months of last year.
Besides building and operating nuclear power plants, CNNC also aims to achieve sales of 10 billion yuan from marketing radioactive materials used in the medical field by 2020, and 40 billion yuan to 50 billion yuan of revenue from coal-related assets such as mining and power generation, as well as wind, hydro and solar energy projects.
It plans to expand the export of its nuclear reactor-building expertise to Argentina, South Asia, the Middle East and Africa.
Proportion of the mainland's total operating nuclear generating capacity that CNNC hopes to attain by 2020