China looks to nuclear option to ease winter heating woes
China looks to nuclear option to ease winter heating woes
State-owned China National Nuclear Corp. (CNNC) recently conducted a successful 168-hour trial run in Beijing for a small, dedicated “district heating reactor” (DHR) it has named the “Yanlong.”
With the north facing natural gas shortages as cities switch away from coal, CNNC presented the “DHR-400” as an alternative heat supplier for the region, with each 400-megawatt unit capable of warming 200,000 urban households.
The model — which consists of a reactor core immersed in a water-filled tank around the same volume as an Olympic swimming pool — will require 1.5 billion yuan ($226.7 million) in investment and take just three years to build, a crucial advantage in a sector plagued by construction delays.
As a small and relatively simple “swimming pool” design, the low-pressure reactor is expected to be safer than conventional models, with temperatures not exceeding 100 degrees Celsius, and it could be plugged directly into existing heating networks.
The technology is ready, said Gu Shenjie, deputy chief engineer with the Shanghai Nuclear Engineering Research and Design Institute (SNERDI), part of the State Power Investment Corp.
“They (CNNC) have supplied heat to their institute and office buildings and have successfully done that for three years,” Gu told Reuters on the sidelines of the INNCH New Nuclear Build Conference in Shanghai, adding that commercialization was the next stage.
“I think it’s workable. The parameters are very low and it’s easy to maintain operations,” he added.
While the use of conventional nuclear plants to provide heating is common in Russia and Eastern Europe, China aims to be the first country to build reactors dedicated to the task of warming its cities.
China is pumping billions of yuan into advanced nuclear technology that will not only boost domestic capacity but also strengthen its global presence. It aims to develop a portfolio of reactors capable of powering cities, remote islands, ships, cars and even aeroplanes.
With northern China still relying on “centralized” heating systems, a DHR in every city could be an ideal solution, said Cheng Huiping, a CNNC technical committee member.
The firm said the technology would use only 2 percent of the radioactive sources used in a conventional 1-gigawatt nuclear power plant, but winning public acceptance remains a hurdle.
“We will have to face 500-600 million ordinary people in northern China and tell them that swimming pool reactors are absolutely safe,” Cheng told a conference earlier this year.
The government is keen on the technology, but cautious about deploying it too quickly, especially amid widespread public anxiety about the risks of nuclear power.
Late last month, Liu Hua, director of China’s National Nuclear Safety Administration, acknowledged the DHR was of “great significance” and could help resolve northern China’s energy and environmental problems. But he also urged CNNC to do its utmost to prove safety and reliability.
Cost will also be a major
CNNC said that, at an estimated 30-40 yuan per gigajoule, it could end up cheaper than gas, but a nuclear industry consultant told Reuters the economics of the DHR were difficult to predict.
The approval process also remains a long one, said Gu at the SNERDI, with each project expected to undergo a battery of environmental impact and conceptual design assessments.
“I don’t think it can be done within five years,” he said.
Gulf companies challenged by debt and rising interest rates
- Debt restructurings on the rise, but below crisis levels
- Central Bank of the UAE has raised interest rates four times since last March
There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.
Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”