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Views Not Our Own - An Analysis on The Outlook of Westinghouse's Impending Bankruptcy and Suggestions for the Chinese Nuclear Industry Response

Nicobar note: In the "Views Not Our Own" series, we publish translated opinion pieces and analyses from thought leaders and influential figures in the Chinese nuclear sphere to allow watchers of China nuclear to gain greater insight into attitudes and sentiments within the  market. The views and perspectives within this translated essay are solely those of the author and do not represent Nicobar Group.

This article was originally published in a combination op-ed + Q&A format with the writer and most topics were addressed far more candidly than you usually see from anyone highly placed inside the Chinese nuclear industry. This is likely a direct reflection of the fact that the writer, Mr. Wen Hongjun, has been retired for nearly a decade and doesn’t have to use the same tactful language you’d expect from current industry players. In our translation, we’ve done our best to translate his sentiment and positions accurately, including portions that came across as more emotional or filled with nationalist sentiment, of which there are many. Mr. Wen’s opinions should not be taken as representative of Chinese industry sentiment as a whole, but rather one perspective from one extreme side of the spectrum. 

An Analysis on the Outlook of Westinghouse’s Impending Bankruptcy, and Suggestions for the Chinese Nuclear Industry Policy Response

Author: Wen Hongjun
Publish Date: October 31, 2017

Translation begins below:

The impending bankruptcy of Westinghouse, a company widely viewed as the “grandfather” of nuclear power development, came as a shock to the worldwide nuclear power community this year.

Westinghouse’s rapid decline and descent into bankruptcy territory

 1.       The AP1000 project is quickly losing steam, marking the decline of Westinghouse

On March 29th, Westinghouse submitted a bankruptcy protection application to the American bankruptcy court. [Following this] The owners of the two American AP1000 nuclear builds in progress, V.C. Summer and Vogtle, announced on July 31st and August 31st, respectively, that they had submitted [construction] continuation proposals to the Georgia Public Services Commission (PSC).

Of the four AP1000 project construction permits [recently] issued by the US Nuclear Regulatory Commission, two [were issued to] V.C. Summer and Vogtle, which are currently under construction, and two additional permits were issued for Lee in South Carolina, and Levy in Florida.

 In just one month, Westinghouse has lost nine units belonging to four projects; two units with the termination of V.C. Summer, the four planned units between Lee and Levy, and 3 units with the “loss” of Moorside. This upheaval is the symbol of both Westinghouse’s wax and wane on the whole, as well as its accelerated decline.

Westinghouse was able to achieve this “wax” with the help of China and its decision to procure of 3rd generation technology, but suffered a series of defeats in the international market, pulling each of its partners into “economic crisis” with each foray. In the end, Westinghouse itself also fell into the “mud pit” that is [its current situation].

According to American bankruptcy law, companies must propose a restructuring program as well as a debt repayment plan approved by both the creditors and the bankruptcy court to receive bankruptcy protection, otherwise the only alternative is “bankruptcy liquidation” [with no recovery option]. The termination of the V.C. Summer build has only served to hasten Westinghouse’s path to bankruptcy. Earning the creditor’s approval of the restructuring program and debt repayment plan is only the first juncture in Westinghouse’s uncertain attempt at survival. The second juncture will be to see whether or not the company, post-restructuring, will be able to sell itself to a new buyer.

2.       Westinghouse: From Resurgence to Decline

China supported and helped realize this resurgence. In 2005, BNFL, then Westinghouse’s parent company, decided to sell Westinghouse. Under BNFL’s control, Westinghouse had underperformed, leading to the decision to have it auctioned. At the time China was inviting tenders for third generation nuclear technology and Westinghouse’s AP1000 was the preferred model. It won the tender, and Westinghouse’s value skyrocketed, sending it down the road to resurgence. Within just a short period of time, Westinghouse’s AP1000 and the French EPR entered into a series of competitive bids in the international market, both winning widespread favor by promoting the technologies’ “advanced” qualities. From this, the two formed a “dynamic duo” that could be seen anywhere a new project emerged.   

 Westinghouse lost its competitive edge, and was left empty-handed. Westinghouse’s positive outlook during this “resurgence” was short-lived; it suffered repeated losses in a series of bids, gaining nothing in the process. It was defeated, for example, [in its bids at] Benele in Bulgaria, Ostrovets in Belarus, and Visaginas in Lithuania. Once the lie, promoted by Westinghouse during the tender process, of the AP1000 being “the most economical option” was exposed, the lack of appropriate verifications subsequently came under scrutiny, and Westinghouse saw a decline in its credibility. Additionally, Westinghouse had no plan [for its customers] to help address treatment and disposal of spent fuel or offer support to raise capital, causing it to be a weak competitor overall. It was therefore not invited to participate in several project tenders and was unable to even secure itself “a seat at the table”. This was exemplified by the bids for Jordan’s QasrAmra and Finland’s Hanhikiri projects. Moreover, Westinghouse failed to secure its own livelihood, even when it was faced with some of the best scenarios possible, namely, in instances in which its buyers had no other choice of suppliers due to political maneuvering; it still experienced project cancellations due to its own internal issues. For example, Temelen in the Czech Republic and Kozloduy 7 in Bulgaria were unable to accept the higher rate of electricity to the end-users that would result from the high cost of the project. It wasn’t economically feasible. Recently the Moorside project in the U.K. has run into some trouble too, so there’s basically no chance of using the AP1000 there. With no international competitiveness, long periods of time with no orders, and no profits, how could Westinghouse remain profitable?  These failures have caused Westinghouse and its partners, one by one, to spiral into decline.

 The American builds have been terminated. America’s new AP1000 NPP builds were subject to delays and burdened with cost overruns, and were forced down the path to termination, incurring heavy economic losses. In the end Westinghouse itself fell into financial crisis, charting its own course into bankruptcy. The aftermath of V.C. Summer’s project termination was painful; Westinghouse laid off 870 workers, including 125 from its headquarters in Monroeville. Another thousand or so subcontractors lost their jobs [too]. In order to protect their interests, the [newly] unemployed workers brought a lawsuit against Westinghouse with the bankruptcy court. On September 25th the Pittsburgh Post-Gazette reported that law enforcement, at the request of both the South Carolina Judiciary and House of Representatives, has begun a criminal investigation against the two project owners for the 900M USD loss incurred due to the failure of the project.     

Westinghouse’s partners have fallen into crisis, one after the other. Failure to receive new orders also affected Westinghouse’s partners. They too have experienced financial crisis and have fallen like dominos one after another. During the resurgence period, Westinghouse assembled a consortium, including Shaw, CB&I, etc., to promote the AP1000. Shaw became the first domino to encounter financial difficulties. First, it returned its 20% share in Westinghouse to Toshiba in order to survive longer. This strategy did not help them to sustain operations and Shaw ended up being taken over by CB&I, its “brother” in the consortium. Later on, CB&I could not sustain operations itself and sold off its subsidiary, S&W. This time, Westinghouse had to take over the company on its own. This misconduct has led to more than one billion dollars’ worth of losses and has pushed Toshiba, Westinghouse’s parent company, to the edge of bankruptcy. The owner of VC Summer NPP has been summoned for interrogation by the overseeing authorities and faces investigation of criminal liability.

The key lesson learned is that the AP1000’s superlatives publicized by Westinghouse are mostly exaggerations. [People] blindly bought their words, followed each other blindly, and only ended up with infinite suffering.

China introduced AP1000 technologies and is now finishing the technology transfer

 Our country started the process to import AP1000 technologies in 2006. It has been over ten years and the projects (Sanmen and Haiyang) have entered their final stages. Now it’s time to “finish the apprenticeship.” The AP1000 projects have finished most of the construction as well as the subsequent design optimization for additional auxiliary systems. Based on our digestion of the technologies transferred, we have additionally designed a 1400MWe demonstration unit which is now almost ready to start construction as well, as soon as the remaining issues are addressed. Therefore, we have basically mastered the transferred technologies and are going to finish our apprenticeship. Well, the last few steps are the hardest. As the Chinese saying goes “the first ninety miles of a hundred-mile journey is only halfway to the end,” and we still face tough challenges. There are two reasons behind our quick learning of the transferred technologies. On one hand, our intelligent engineers and technicians have striven really hard. On the other hand, the technologies and design provided by Westinghouse were so immature and full of gaps that our engineers had to make up the differences by themselves, which actually gave them the opportunity to better master the technologies. Solving the problems on their own made it easier to understand, absorb, and master the core content of the introduced technologies.

The AP1000 under construction in our country is neither the Revision 15 permitted by the U.S. NRC, nor the later-permitted Revision 19. We developed our own version with some “Chinese characteristics.” After Westinghouse started the bankruptcy protection proceedings, the new CEO Jose Gutierrez announced that the AP1000 model under construction in China would replace the originally-planned Version 19 and become the standard AP1000 model to be promoted by Westinghouse in the future. It appears that the China model has more potential than the original Rev. 15 and 19 and has become Westinghouse’s orthodox “C [China]” model.  Yet it does not change the ownership of the intellectual property rights. The following AP1000, or ‘CAP1000’ units to be built in our country are still the “American AP1000,” and the intellectual property rights have nothing to do with China. In addition, the design itself has some unresolved problems; we have had to purchase some special equipment and materials through Westinghouse. The special equipment and monopolization of certain materials may become Westinghouse’s “grasping tools” and make it easier for them to raise prices for, blackmail, or control [the projects in China]. Despite the fact that we are almost finishing the apprenticeship, wide gaps still exist between our current status and owning a brand with complete intellectual property rights.

The value, assets, and capabilities of Westinghouse

 1.       How much is Westinghouse worth?

In 2000, the valuation was 1.585 billion dollars. BNFL purchased Westinghouse in March 1999 at the price of 1.1 billion dollars and took over ABB-CE for 485 million dollars in December of the same year. The two companies merged into Westinghouse Electric, which was worth 1.585 billion dollars.

In 2006, Toshiba purchased Westinghouse at 5.4 billion dollars. In 2005, BNFL experienced financial strain so it put Westinghouse for auction with a reserve price of 1.8 billion dollars. The Mitsubishi Group bid 1.78 billion dollars [at the beginning]. Meanwhile, China was tendering for Gen III reactor type and nuclear technologies. The fact that China was favoring the AP1000 enabled Westinghouse to speak so high of itself that the bid price was driven up. Mitsubishi tripled its bidding price to 3 billion dollars. In the end, Toshiba anomalously offered 5.4 billion dollars and won. The final price was three times higher than the reserve price and Westinghouse was overvalued.

2.       Westinghouse’s usable assets and shortcomings.

Westinghouse is regarded as the pioneer, or “grandfather,” in the nuclear industry worldwide and used to make enormous contributions [to the industry]. Westinghouse started from the military industry with its core competencies in developing and designing reactor types. At this moment, with the parent company Toshiba wanting to sell Westinghouse in response to its own financial strain, I expect that someone will take over Westinghouse’s reactor type technologies and services, which are valuable and usable assets. Westinghouse also has a number of PWR fuel assembly plants which are still serving Gen II NPPs worldwide. Although the Gen II technology is outdated now, fuel assemblies are still essential to the operation of these Gen II NPPs. Therefore, they are usable assets as well.

However, nuclear engineering and construction, i.e., EPC, project design and project management, is not Westinghouse’s strength. Toshiba decided during its financial crisis that Westinghouse will no longer engage in construction projects and will stay focused on the areas of reactor design and maintenance services. This decision also suited Westinghouse’s historical characteristics. In the past, Westinghouse was mainly responsible for the reactor main body in its military and civil nuclear projects, while other engineering and construction companies were contracted to perform the roles of EPC, engineering design, and project management. Manufacturing responsibility for fabrication of primary equipment in the NPP were transferred to Japan and Korea. Westinghouse now suffers severe devastation from taking on the EPC contracts for the two AP1000 projects in the U.S., which serves to prove [that Westinghouse shouldn’t be in this business]. In terms of comprehensive competitiveness in the market, Westinghouse lacks operational experience in NPPs, capacity to finance its projects, and capability to facilitate fuel supply and spent fuel management. Current [new build] markets in developing countries usually require comprehensive and integrated services for the above areas, which Westinghouse cannot provide. This is one of the main reasons why Westinghouse suffered repeated defeats in international tenders.

3.       Core technologies remain unverified. Application of advanced technologies has to be preapproved and verified. Unverified “advanced technology” is merely a potential safety hazard.

The design of the AP1000 is Westinghouse’s core asset. It has been 17 years since the original design concept was first presented. Rev. 15 and 19 of the AP1000 design obtained their design certificates from the NRC and the AP1000 project in the UK also passed its Generic Design Assessment. The AP1000 won China’s tender for Gen III nuclear technology and initiated the construction of four units at two sites in China. In the U.S., another four units at two sites were also initiated as the AP1000 design Rev. 19 ‘demonstration and verification projects’. The two batches of ‘demonstration and verification’ projects have eight units in total and should have been completed a long time ago according to the original plan. It is now time to see their results. However, because this is a brand new revolutionary technology, the demands for verification and validation of the design were high and there were many items that needed to be verified. With time limitations, the verification work was insufficient and the results were not reliable. As time went on, many ‘inherited’ problems were discovered. In contrast to progressive or evolutionary design, a so-called ‘revolutionary’ design requires some substantive experimental research, including scientific feasibility verification for completely passive safety systems, the probability and mechanism for hydrodynamic failure in the passive residual heat removal system, etc… Due to time constraints, these tasks were not completed. Other potential hidden security risks are also yet to be ruled out, for example verification and validation testing for the canned motor pump and explosion valve. 

4.       It’s time to end our blind faith in Westinghouse

Westinghouse used to be known as the “grandfather” of nuclear technologies and made lots of contributions as a pioneer. But it has not set its feet in field construction for too long and has little modern experience. It has also gotten slow and aged in technology development, and has already lost the glory of the old days. [For example,] Westinghouse’s design for an SMR is just a miniaturized AP model (22.5MWe) and is not innovative enough. The SMR design lost two rounds of tenders held by the U.S. Department of Energy and was defeated by B&W’s Generation mPower and a 5MWe NuScale model.

Westinghouse’s fuel assembly business is declining as well. For example, one of its old fuel assembly plants was taken over by the French company Areva. In another example, both Russia and the U.S. plan to reprocess and recycle plutonium for peaceful uses. The U.S. wanted to build a MOx fuel plant [and opened tendering for the program]. Westinghouse was not qualified to participate the tendering because it did not have the technology. Westinghouse also has a few Gen II light water fuel assembly fabrication facilities with outdated technologies. It got a big contract to sell the Russian-style fuel assemblies to Ukraine with the assistance of the U.S. government’s diplomatic and political leverage. However, two major accidents occurred during the trial period and became a black mark on Westinghouse’s reputation in the international market. It was basically a straight copy of the older Russian technology back from in the 1970s and Westinghouse still messed it up. It further demonstrated Westinghouse’s limited technological capabilities.

Who will take over Westinghouse?

Following the conclusion of Westinghouse’s bankruptcy protection, the next juncture would be restructuring to be sold as a newly integrated corporation and find a new owner. Who will take it over?

1.       Attitude of the U.S. government

President Trump promised to rescue the dying American nuclear industry. A senior U.S. nuclear policy research fellow advocated that “the U.S. government should restore and develop nuclear industry” and proposed many policy recommendations. However, with regard to whether to save the bankrupt Westinghouse or not, the researcher’s opinion was to give it up and said it is both “impossible” and “unnecessary” to save it. A report in another recent article claimed that the U.S. government is seeking a buyer to take over Westinghouse so that it will not fall into Chinese hands. This article focused on the three actions being studied: the U.S. government directly impedes [any potential sale to] China; encourages domestic investors or those from ally countries to take it over; or purchase its stocks directly and holds the shares [as state property].

Westinghouse let the U.S. government down as a diplomatic tool. As a diplomatic and political tool of the U. S. government, it performed poorly and inspired disappointment.

The U.S. government placed sanctions on Russia as a response to its activities in Ukraine. It mandated Westinghouse to provide Ukraine with the Russian-style fuel assemblies as a substitute supplier for Russia so that the strategic connection between Ukraine and Russia could be cut. The movement was a part of the plan to sanction Russia with diplomatic isolation. Westinghouse got this big contract with great support from the U.S. government and the international political environment. Yet two accidents occurred during trial operation using Westinghouse’s copies of the Russian design. The project was slowed down and the Russia-Ukraine connection remained.  

The U.S. government also planned to use the AP1000 to infiltrate the Chinese nuclear market and serve as a portion of its strategy to control the development of China’s nuclear industry, but this has been a complete failure. At the beginning of the introduction of the AP1000, China accepted the exclusive policy called the “leap forward development” and agreed to halt all construction of non-AP1000 units.  [Under this deal] China would hand over its whole nuclear market to Westinghouse and it could control and blackmail China through its patent rights, special key technologies, equipment and materials. Foreign media commentators said that “it creates possibilities for the U.S. government to suppress the development of the China nuclear industry and thus achieve a strategic goal.” But as the project was carried out, it met widespread doubt in Chinese nuclear circles. During construction, issues constantly arose with regard to technology, equipment, delays, overruns, etc. With the collective endeavors of China’s domestic experts, China broke through the constraint to exclusively develop the AP1000. There were two main rounds in the breakthrough: first, the domestically modified Gen II + reactor type realized industrialized/large scale development and made China a leader in the global new build market; second, the launch of the original HPR1000 reactor design of which China owns complete proprietary intellectual property rights. Now it’s time for a third round: finish the technology transfer of AP1000, turn it into a brand with our proprietary intellectual property rights, and get rid of dependence on foreign technologies and foreign control. Therefore, we are able to crush the U.S. attempt to control the China nuclear market through the AP1000 and suppress the development of China’s nuclear industry. This has also caused the U.S. government to be disappointed with Westinghouse.

In one word, the U.S. government is fully aware of the technological capabilities and operational situation of Westinghouse and regards it as what we call “chicken ribs” in China:  be hardly worth eating but not bad enough to throw away. The U.S. government is unwilling to spend the money to save Westinghouse, while being afraid of seeing it falling into Chinese hands. The ideal situation would be finding a submissive new buyer to spend its money, save Westinghouse, and run the company on the U.S. government’s behalf.

As a response to public queries toward the necessity and feasibility of building new NPPs in the U.S., officials have repeatedly claimed that nuclear technology is a diplomatic tool. The four units under construction in China still serve some diplomatic purposes as part of America’s foreign policy toward China, yet their importance has fallen greatly.

2.       Korea's KEPCO

Westinghouse is now on the edge of bankruptcy and who will take it over? The Korean company KEPCO is believed to be a possible candidate. However, according to Financial Times, Korea has eliminated the possibility to purchase Westinghouse shares. It also says that Korea still wants/welcomes foreign technologies yet the country already has its own technology. The takeover has enormous financial risks and very few people are pushing for it [in Korea].

There are also two challenges if Korean Electric Power Corp., (KEPCO), wants to buy Westinghouse. First, how to run the company? It will follow Toshiba’s tragic trajectory if it becomes the new parent company while the executive power remains in the hands of U.S. government, just like Toshiba’s “ghost ownership.” Second, Korea already has its original APR1400 technologies and the Barakah project, a technology export to UAE, has been a success.  The APR1400 has already became a black horse in the international market and there is no need for Korea to also introduce the frequent loser, AP1000. The new Korean president Moon Jae-in has also announced the de-nuclearization policy and has promised to phase out nuclear power gradually in Korea. There will be no more domestic market for APR1400 and so KEPCO is looking for more opportunities in the international market, for instance the U.K. KEPCO is also interested in investing NuGen’s Moorside project, with the requirement being to replace the AP1000 with APR1400.


3.       U.S. non-nuclear private enterprise

It was reported on September 27th that BlackStone, an American private capital group, and Apollo Global may want to acquire WEC.   

Will China save Westinghouse? 

 Pay attention to changes that already occurred. The situation this time that Westinghouse is looking for a new owner is drastically different from the 2005 BNFL tendering.

First, Westinghouse has changed a lot. Last time when BNFL was selling it, Westinghouse had just launched the blueprint of the AP1000 design and obtained permits from NRC, while China was favoring the design which gave it more leverage. This time, however, it is ‘begging’ to sell after Westinghouse was repeatedly defeated in international tendering and had projects terminated due to cost overruns and project delays. It cost the parent company huge losses. Westinghouse is becoming “chicken ribs” quickly and is making itself look really bad.

Second, the previous tendering was well prepared. It was like seeing the daughter getting married off with lots of trousseau. This time, on the contrary, is an emergency response to pay off the debts. It’s a desperate move like selling your children.

Third, China used to favor AP1000 a lot and now has its own doubts. China found out that the technologies transferred are far less advanced than what Westinghouse claimed them to be and now feels like it was fooled.

Fourth, the U.S. government now has lower requirement for a new owner. Last time, the executive power remained inside Westinghouse and didn’t go to Toshiba with the ownership. Now that clause is gone as long as the company stays out of China’s touch.

 Will China bail them [Westinghouse] out?

 In principle, no. We already have our own technology portfolio, including what we’ve imported and there’s nothing we could need there, apart from a small portion of their usable assets that could be sold off (and there aren’t many). Westinghouse’s reputation isn’t what it used to be, so it wouldn’t be much of an asset for us leverage in our export efforts. Besides, we need to liberate our way of thinking…we have passed the point of needing to import tech…we have our own smart technical experts and proprietary IP – it’s time to work on self-improvement.

There are specific scenarios in which we would bail them out, but the following [4] conditions must be met:

First, it couldn’t be under a “dual-citizenship” management framework like what was done with Toshiba; the control would need to be entirely in our hands

Despite the so-called “minimal inference” policy that the US government promised the Japanese, what actually happened is that Toshiba assumed all the financial liability of the company while the planning, strategy and management all lay with the Americans. With poor management, it created huge losses [for Toshiba]. In addition…Westinghouse became like a diplomatic tool for the US government. We need to have actual leadership authority

Second, the price would have to be very low

Westinghouse doesn’t have any leverage to negotiate. And if we caught any whiff of US government interference or another company in the running, we’d pull out immediately. There’s no need to pay big money for spoiled goods.

Third there would need to be an adjustment to the direction of operations.

 We would want to see it focus exclusively on its strengths in reactor R&D, and pull out of the reactor construction business. Their activities would be merged into our comprehensive national nuclear power R&D plan. 

Fourth, there would need to be a complete restructuring

Just like what EDF did with BE in the UK, we would totally restructure after acquisition, take control of the strategy and operations philosophy, turn it into a Chinese research and design institute for nuclear reactors, and do away with the Westinghouse brand-name

4. How the Chinese Nuclear Industry Can Move Forward [Following Westinghouse’s Bankruptcy]

Provided safety can be assured, we will complete construction of the current AP1000 builds.

The V.C. Summer and Vogtle projects [were supposed to be] Westinghouse’s “second echelon of AP1000 test platforms” before meeting a premature end. The Chinese plant construction projects at Sanmen and Haiyang, as the first echelon, have the primary function of proving the overall viability of [AP1000] construction and technology, as well as its economic [viability], and those projects proceeded relatively smoothly compared to the second echelon in America. But, due to issues arising from intrinsic characteristics of the AP1000 design, those projects, as was the case with the American projects, also saw problems with cost overruns, delays, and equipment deficiencies, which added on [an extra] 4 years to the project and nearly doubled the cost of investment. That money will be difficult to make a return on, and the economic survivability of the projects is now a matter of uncertainty. However, China invested painstaking effort and a considerable amount of money into these projects, and should therefore continue [with them], learn [from them], and strive to gain [from them].

However, these projects can only continue under safe conditions. We must do our utmost to avoid [what could be] objectively risky or any “shortcuts” to deadlines, treading safely forward. We [should] only make progress once the remaining technology-related safety issues, or any other hazards have been removed from the equation.

Westinghouse should be held strictly liable and financially responsible for any of the losses incurred due to its unfulfilled contractual obligations.

Firstly, we should conduct a “disassembly inspection” of the canned motor pumps, loading nuclear fuel only once we are sure [the components] are intact. Problems with canned motor pumps are often only discovered during the “disassembly” portion of the testing [phase]. “Changes” [in how the pumps run] have been observed with several pumps that have been in operation for a long [enough] period, giving [us] ample reason to be worried about the [the possibility of other] remaining issues. We should use “disassembly inspections” to verify [the safety of the equipment] and assuage people’s concerns. Conducting these inspections prior to fuel loading is both wise and necessary. Westinghouse, in its role as the supplier, did not provide sufficient reason for refusing [to conduct these inspections in the first place]. Since the cost wouldn’t be that high, this could only be indicative of fear and a guilty conscience [on the part of Westinghouse]. This refusal “vainly” attempted to push the burden of responsibility onto the Chinese leadership [within the industry]. Now that we are waiting on approval to begin fuel loading, [Westinghouse], in theory, would absolutely have the time to complete this task.

Secondly, The AP1000 is not simply a follow-on design to other third generation models, it is a revolutionary design [requiring] substantial research and development; this R&D is [precisely] the prerequisite for moving construction along. The scientific feasibility of the AP1000 passive safety systems should have been verified in the demonstration phase. [An item of such concern], for example, is the study on the hydraulics testing failure rate of the residual heat removal system. Westinghouse already “tested” [this] using Sanmen’s unit 1, and how did that work out? Was that the proper [administrative] channel to go through? Was the problem solved? [I] don’t know why [we] haven’t yet seen a public announcement on the result [of that testing]. [Some] people suspect that the testing was not in keeping with its original intention. The question of the safety concerning AP technology needs [to be answered] with transparency and objectivity.

There are additional remaining problems similar to [what was revealed by] the feasibility testing of the explosion valve, and we should continue to address them.
Based on research digested from importing the AP1000 technology, as well as the significant amount of its own independent R&D, SNERDI has made much progress on the development of the CAP1400. But the problem that the CAP1400 is facing is related to the AP series [as a whole]. Its construction should only be commenced after testing of the primary pump has been successful, and after other AP series issues are addressed [at the base] with the AP1000.

Future Prospects and the Way Forward for the AP Series

Design changes must be made. The AP1000 has suffered a series of attempts and [subsequent] failures in the international market, and [is now] in the midst of bankruptcy following the failures of the two [aforementioned] American builds. The, by contrast, relatively smooth projects in China also experienced delays and cost overruns, with the fundamental problem resting in Westinghouse’s “modus operandi” [that consists of] manipulating competition within the international market, and seeking innovation at the cost of economic [feasibility]. And in the process of “robbing us of progress”, Westinghouse neglected the thorough scientific testing of new technology, and fell into this trap of [having its technology labeled] “expensive, delayed, and subject to cost overruns and safety issues. [Westinghouse’s failure here] has additionally resulted in high [investment] costs and high electricity prices [needed to cover the costs], a loss in its ability to produce carbon-alternative power, a loss in its ability to compete with wind and solar, grief on behalf of the government and the people, and its very means to self-reliance and survivability.

How can China pursue development now that the AP1000 technology has been imported? We must make our own design changes, including major changes to the design scheme, pushing for greater “maturity”, more “Chineseness”, as well as more cost-saving, creating our own brand “with Chinese characteristics”. [These changes] are necessary for the survival of the development of the AP-series technology.

We need greater emphasis on ensuring safety and mature development, achieving each in full.

Advanced technology that has yet to be proven isn’t advanced, it’s a hazard. To address this, we need to conduct ample testing or substitute [the tech] with mature technology that has already been proven. Canned motor pumps and explosion valves [are components that] are potential causes for concern. If it seems the components should be replaced, there is no need to rigidly adhere to the “passive [safety] framework” [of the AP1000 design]. We need to get rid of each of the existing safety hazards.

Completion the upgrade and advancements with Chinese rebranding and improved economics.  We must create a proprietary brand with [Chinese] characteristics. Based on our experience with field construction, we should perfect the model and make it more Sinicized and standardized. We want it to be a reactor type that can be made by ourselves and reflect the true strength of Chinese nuclear industry. The Sinicized model must be suited for China and must be integrated into standardized Chinese systems, for instance, using 50 Hz power supply equipment to replace the 60 Hz ones. We need to erase the traces of America and Westinghouse. We ought to achieve proprietary and localized sophisticated technologies. For those equipment and materials with a monopolistic nature that are harder to buy in international markets, we need to localize them as soon as possible. Canned motor pumps is one instance where foreign companies could use a market monopoly and derivative pricing power and supply capability to blackmail and control China. It is also urgent to solve the IP-related problems.

Lower the costs and making plants cheaper is also necessary to suit the situations of developing countries. It is a primary goal and necessary condition for our original model to survive and develop, and a prerequisite to eventually “go out” into international markets. The French-developed EPR now has a new version design called “EPR-New” that aims for a 25% cost cut (this is still not enough, they’ll need to work harder). On the flipside, no upgrade plan has been mentioned by Westinghouse with regard to the AP1000. We should do it by ourselves. The new model should meet the modern demands for the development of nuclear power.

The new model need to be distinct enough and cut its connections with the old AP design. It should have its own uniqueness as part of an original Chinese [reactor type] system. It is important to cast off the dependence on America’s Westinghouse and its control. I suggest to give it a new name with Chinese characteristics. Since we already have “Hualong” [China Dragon, HPR1000], we can follow this example and name it something like “Xiafeng” [Sino Phoenix], meaning the Chinse nuclear industry will have both dragons and phoenix and will fly high in the international market, very auspicious indeed. 

This positive outlook needs to develop a solid foundation. We need to set our feet on the ground and work really hard. First of all, we need to solve the existing problems of the projects under construction and do a good job on our upgrades of the current reactor designs. The bright future will be nothing but empty talk without sufficiently strong endeavors on our part.

We need to resolutely and consistently promote the development of Hualong One [HPR1000] technology both domestically and abroad.

We need to excel on our domestic and overseas projects

 We need to build Fuqing Unit 5&6 and Karachi Unit 2&3 in good time, breaking through the “normalcy” of schedule delays for FOAK construction. These four units need to be established as outstanding examples of nuclear project construction. We also need to improve our marketing and promotion capabilities.

We need to have the HPR1000 tech verified under the EUR apparatus as well as the GDA in the UK.

CGN has already applied for the British GDA [for the Bradwell B project]. I urge CNNC to apply for safety inspections of related EUR institutions. Once they perform well and pass the assessment with high marks it will be easier to promote our international reputation and accelerate the speed of ‘going out.’

Strengthen further development of the Hualong 1 [HPR1000]. We need to adapt digital and computer-based technologies and further develop the Hualong 1 to make it safer and more economical.

Move toward the direction of having a systemized series. We need to further upgrade [the current reactor types] and make them a systemized series, which strengthen our capabilities to “go out” to meet the diverse and flexible market demands.

The import of the [foreign] AP1000 technology has now morphed into a potential opportunity for China to develop an indigenous 3rd Gen reactor type. Once our technological “metamorphosis” is complete, we can free ourselves of Westinghouse, free ourselves of the shadow of the AP [series], “spread our wings as a phoenix reborn”, and realize a brighter future for ourselves.

 Final Words

The mainstream western technology exemplified by the AP series and the French EPR design have both fallen into the trap of being expensive, both subject to delays, both subject to cost overruns, both fraught with equipment safety hazards, and both leading to bankruptcy for their designers. On the other hand, the Russian VVER1200, the Korean APR1400 and our own Hualong all have a reasonable price, on-time construction, strong orders, and have none of the other problems associated with the mainstream western models.

In the new age of Gen III, we have witnessed a distinct contrast between the mainstream western reactor types and the Chinese, Korean, and Russian ones. The Chinese nuclear industry has been recognized worldwide for our economical and effective construction capabilities. The delicate design of the HPR1000 integrates active and passive designs well and is extremely economically competitive. Although we had an 8-year pause in R&D, we have now caught up very quickly. 6 units are currently under construction, which also demonstrates the future livelihood [of the reactor type]. Phasing out the outdated and embracing the innovative is a natural trend. Survival of the fittest is the secret to thriving. Our country’s nuclear industry development is eliminating dependence [on Western technologies], breaking through external constraints, overtaking the mainstream designs, and stepping into a new age.