Doing Nuclear Business in China

By Curt Cultice, Senior Communications Specialist, and Xiaobing Feng, Senior Regional Manager for China and Mongolia with the Trade Advocacy Center, U.S. Commercial Service

In early 2009, the Westinghouse Consortium—comprising Westinghouse Electric Co. and its partner, The Shaw Group Inc.—broke ground on a $5 billion project in China. Not only is it the largest transaction in Westinghouse’s history, but it serves as an excellent example of how U.S. businesses, with help from the U.S. government, are tapping opportunities in China’s growing infrastructure market.

The Sanman site in China. The Sanman project is the most advanced of the four Westinghouse AP1000s currently under construction there. Photo, Westinghouse. Click here to enlarge image

The Westinghouse Consortium is constructing four nuclear reactor plants in Sanmen in Zhejiang Province and Haiying in Shandong Province, both on China’s east coast. The first plant is scheduled to become operational in late 2013 in Sanmen, with the remaining three plants expected to come online in 2014 and 2015.

To help win the contract, Westinghouse turned to the U.S. Commercial Service, the trade promotion unit of the Commerce Department’s International Trade Administration, and its Trade Advocacy Center to navigate the many layers in China’s complex government procurement market and solidify the firm’s position in the bidding process. It was a familiar working relationship, since the company had utilized Trade Advocacy Center assistance in pursuing other projects. The Trade Advocacy Center helps level the playing field for American companies competing on foreign government tenders.

Washington Lends a Hand

Headquartered in Pittsburgh, Pa., Westinghouse Electric was long familiar with the Chinese market, having established business relationships with the Chinese beginning in the 1990s on smaller projects. The company also worked to train Chinese engineers visiting the United States. A few years ago, with its consortium partner, The Shaw Group, of Baton Rouge, La., Westinghouse began pursuing new international markets for its advanced nuclear energy technology.

CR-10 module with lower rebar installed at Sanman. Photo by Westinghouse, courtesy U.S. Commercial Service. Click here to enlarge image

The consortium identified a tender issued by the Chinese, who were interested in developing their nuclear energy industry to help address energy shortages in their country. By the fall of 2003, the Westinghouse Consortium began actively pursuing the Chinese project tender for civilian nuclear reactors but had no illusions about the challenges that lay ahead in securing a winning project bid.

“We knew a deal with China would really open doors for us but that it wouldn’t be easy, as it was a multi-billion dollar project that would draw intense international interest,” said Westinghouse Board Chairman and former CEO Steve Tritch. “We had some of the best cutting-edge technology and expertise to offer, but wanted to ensure that key Chinese decision-makers understood the full benefits and merits our proposal would bring to bear.”

To help make its case with the Chinese government for the project bid, Westinghouse lined up direct support from the U.S. Commercial Service’s Trade Advocacy Center—the coordinating point for advocacy issues among the U.S. government’s Trade Promotion Coordinating Committee (TPCC), a group of 20 federal agencies involved in supporting U.S. exports.

Meanwhile, international competition was heating up as French and Russian companies sought support from their respective governments as well. By February 2005, Westinghouse and others had submitted bids for the project and the race was on. The Trade Advocacy Center coordinated letters of support from officials at the Departments of Commerce, Energy and State, as well as then U.S. Ambassador to China, Clark T. Randt. The U.S. Commercial Service offices in China were instrumental in the effort, introducing Westinghouse officials to high-level Chinese decision-makers. The U.S. Commercial Service also helped Westinghouse impress upon the Chinese the advantages of U.S. technology, its quality and the level of after-the-sale service. This effort was reinforced by the consortium members’ participation in a November 2006 trade mission to China led by Carlos M. Gutierrez, Secretary of Commerce at the time.

In a key move that helped finalize the deal, U.S. government officials worked with their Chinese counterparts to draft a memorandum of understanding (MOU). This established the terms for mutual cooperation and support for commercial nuclear power projects and was signed by (then) U.S. Secretary of Energy Samuel Bodman and Chinese National Development and Reform Commission Chairman Ma Kai in December 2006. The MOU further signified to the Chinese that the U.S. government would take all appropriate action to enable Westinghouse to carry out the contract.

Shortly thereafter, the Chinese completed their review of the international bid proposals and made their decision: The winner was the Westinghouse Consortium.

New Sales, New Opportunities

By the end of 2006, initial design, engineering and long-lead procurement work began and a comprehensive agreement was signed with China’s State Nuclear Corporation at the Great Hall of the People in Beijing on July 24, 2007.

“This China deal is a real breakthrough,” Tritch said. “Not only is this the first-ever deployment of advanced U.S. nuclear power technology in China, but it’s a win-win for both China and the United States.”

Chinese workers at Westinghouse construction site. Photo by Westinghouse, courtesy U.S. Commercial Service. Click here to enlarge image

According to Westinghouse, the new power plants will greatly increase China’s ability to generate significant additional baseload electricity in a clean, safe and economical manner. The United States and China will also benefit from the creation of new jobs that support mutual economic growth. On the U.S. side alone, Westinghouse reports that the estimated $5 billion project will create or sustain a minimum of 5,000 U.S. jobs within Westinghouse and among its suppliers from small and medium-sized companies located in at least 20 states. These include well-paying jobs in both the design/engineering and traditional manufacturing sectors that are vital to the U.S. economy.

Robert Zoglman, a senior consultant to Westinghouse who had served as the company’s vice president for government and international affairs, said the four new plants will serve as the standard for future nuclear power plants. This could provide Westinghouse with an advantage in winning future contracts, including maintenance and servicing. Altogether, the Chinese government plans to spend $50 billion on at least 30 nuclear reactors over the next decade.

“China’s potential market for nuclear energy technology is virtually unlimited,” said Zoglman. “Even when they complete the 30 reactors, nuclear energy will still only account for 4 percent of China’s total electricity output and their energy needs are only going to keep growing.”

Zoglman said that one of the major challenges for Westinghouse and for other U.S. companies selling to China is the strong international competition for local nationals—that is, Chinese managers who speak fluent English—who are needed to help maintain and build up a strong network to support ongoing nuclear energy projects, a priority for Westinghouse.

The Westinghouse Consortium deal in China ranks as one of the largest non-aerospace successes generated by the U.S. Commercial Service’s Trade Advocacy Center and the TPCC, which continues to facilitate billions of dollars in export successes annually for U.S. companies. With the China deal signed, Westinghouse sees great potential for sales in other countries as well.

Like many other U.S. companies, it has found the presence and efforts of the Trade Advocacy Center reassuring in its quest for new business.

“I want to emphasize just how hard the United States government has worked to support Westinghouse … and in assuring us an opportunity to compete for this rewarding and mutually beneficial business in China,” Tritch said. “Having the backing of the U.S. government brought an added degree of credibility to the negotiation process with the Chinese, and without this advocacy support, this deal wouldn’t have happened for us.”

Authors: Curt Cultice is a senior communications specialist with the U.S. Commercial Service in Washington, D.C. In his position, Mr. Cultice works to promote business and public awareness of Commercial Service export assistance programs through the news media. He has also written several articles on trade and exporting. Xiaobing Feng is senior regional manager for China and Mongolia with the U.S. Commercial Service’s Trade Advocacy Center. In her capacity, Ms. Feng advises and counsels businesses on developing strategies to compete successfully on international project opportunities.

The U.S. Commercial Service is part of the International Trade Administration, which is dedicated to creating economic opportunities for American workers and businesses by promoting trade and investment. In 2008, the U.S Commercial Service helped facilitate nearly $70 billion in U.S. export sales.

U.S. Commercial Service resources for U.S. companies and international buyers

The U.S. Commercial Service is part of the International Trade Administration (ITA), which is dedicated to creating economic opportunities for American workers and businesses by promoting trade and investment. In 2008, the U.S Commercial Service helped facilitate nearly $70 billion in U.S. export sales.

Sanmen Unit 1. In spring 2009, the first concrete placement was finished. The pour encompassed 5,200 cubic meters of concrete, 950 tons of reinforcing steel and 1,000 anchor bolts. Photo by Westinghouse, courtesy U.S. Commercial Service. Click here to enlarge image

Commerce’s manufacturing and services unit (MAS) (www.trade.gov) works to enhance the global competitiveness of U.S. industry, including the civilian nuclear power sector and provides key economic and industry analysis for U.S. businesses.

MAS leads the department’s civil nuclear trade initiative, which includes:

• A new civil nuclear industry advisory committee
• Promotion activities including overseas trade missions to key markets, an industry promotion program at the annual IAEA General Conference and official U.S. government advocacy in international bidding processes
• Other resources for U.S. companies, like the new Civil Nuclear Exporters Guide (www.ita.doc.gov/td/energy/Civil) and industry briefings on topics like export controls

Commerce’s market access and compliance office (www.trade.gov) works to help U.S. industry identify and overcome trade barriers, resolves trade policy issues and ensures that U.S. trading partners fully meet their obligations under U.S. trade agreements.

U.S. Commercial Service’s (www.trade.gov/cs) global network of trade professionals is located in offices across the U.S. and in American embassies and consulates in nearly 80 countries.

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