March 2 (Bloomberg) -- Westinghouse
Electric Co., whose designs run half the
world's nuclear reactors, is counting on
U.S. government help to unseat France's
Areva SA as the leader in China's
nuclear-power market.

Paris-based Areva, the world's biggest
reactor builder, is banking on history:
It has supplied four of China's nine
working nuclear plants over 20 years.
Westinghouse, previously shut out of the
market by a U.S. export ban, is now
vying with Areva for an $8 billion
contract to build four Chinese reactors.
Both companies submitted bids to meet a
Feb. 28 deadline.

``The U.S. government has been very
supportive of overall China-U.S. nuclear
cooperation,'' says Gavin Liu, 37,
Monroeville, Pennsylvania-based
Westinghouse's representative in
Beijing. ``It's a very, very critical
market for Westinghouse.''

China's nuclear-power market is growing
faster than any other as environmental
and safety concerns halt U.S. and
European reactor construction. The four
planned reactors are the first of more
than 20 in a $54 billion push to
quadruple Chinese nuclear- power
capacity by 2020 -- an effort to ease
power shortages in an economy that grew
9.5 percent last year.

``The industry does need new orders, and
it seems that China is going to be the
most positive feature,'' says Steve
Kidd, 48, director of strategy and
research at the London-based World
Nuclear Association, which promotes
nuclear power use. ``In world terms now,
it is the biggest expansion.''

U.S. Ban Lifted

For Westinghouse, the U.S. unit of
state-owned British Nuclear Fuels Plc,
the pending Chinese contract is the
first opportunity to sell nuclear
hardware to China since the U.S. lifted
a ban on such exports in 1998.

U.S. President George W. Bush's
administration has pushed to boost his
country's involvement in China's nuclear
program. As the only U.S. bidder for the
current Chinese contract, Westinghouse
is the main beneficiary of those
lobbying efforts.

``The U.S. government has supported
helping the Chinese in their economic
development, and part of that is
producing energy,'' says Bruce Blakeman,
special counsel to U.S. Commerce
Secretary Carlos Gutierrez at the U.S.
embassy in Beijing. ``It's something
where American companies have a great
deal of expertise and the best
technology.''

Westinghouse is leading a group of
bidders that also includes San
Francisco-based Bechtel Group Inc. and
Tokyo-based Mitsubishi Heavy Industries
Ltd., according to Westinghouse
spokesman Vaughn Gilbert. While
Westinghouse is owned by Warrington,
England-based British Nuclear Fuels, a
successful Chinese bid would add
billions of dollars to U.S. exports and
create thousands of U.S. jobs, says
Blakeman, 43.

Congressmen in Beijing

U.S. government officials have visited
Beijing in the past year to back
Westinghouse's bid, Blakeman says. They
included a group of congressmen led by
Ohio Republican David Hobson, chairman
of the House Appropriations Subcommittee
on Energy and Water Development, who
visited last April, Blakeman says.

Former U.S. Energy Secretary Spencer
Abraham, who left the post on Feb. 1,
lobbied for Westinghouse during a
meeting with Zhang Huazhu, chairman of
the state-run China Atomic Energy
Authority, in Beijing in December, the
authority says.

``He pointed out that both governments
have made efforts on nuclear cooperation
and hoped their nuclear industries could
follow,'' the Chinese authority said in
a Jan. 7 report. ``He said Westinghouse
Electric Co. had participated in the
bidding process for new Chinese nuclear
projects based on its capability and
good record.''

Abraham, 52, declined to comment on U.S.
government support for the bid.
Westinghouse and Areva officials say
they expect China to choose a winning
bidder by early 2006.

U.S. Trade Deficit

Pressure on China to reduce its swelling
trade surplus with the U.S. may give
Westinghouse an edge over Areva, says
the World Nuclear Association's Kidd.

``The very big trade surplus that the
Chinese have with the U.S. might save
the U.S. vendors in the next round of
bidding,'' Kidd says. ``American
companies are pushing very hard, and
they're quite hopeful of getting a
significant amount of business for the
next 10 years.''

The U.S. trade deficit with China
widened 31 percent to a record $162
billion in 2004, according to U.S.
government figures. France's trade gap
with China last year was a fraction of
that size at 11.5 billion euros ($15
billion).

`Deep Concern' Over Arms

The U.S. push to sell nuclear reactors
to China comes as Bush opposes plans by
the European Union to end a 16-year
embargo on weapons sales to China.

``There is deep concern in our country
that a transfer of weapons would be a
transfer of technology that would change
the balance of relations between China
and Taiwan,'' Bush said at a press
conference in Brussels on Feb. 22.

Russia's state-owned AtomStroyExport is
the third contender for the pending
Chinese reactor contract.

``It's a very promising market,''
AtomStroyExport President Igor Klochko
said in a faxed response to questions.
The Moscow- based company won an earlier
contract to build two Chinese reactors,
which aren't operating yet, he said.

China's nuclear expansion will boost the
country's share of global nuclear-power
capacity to 10 percent by 2020 from
about 2 percent now, making China the
world's No. 4 generator of nuclear power
after the U.S., France and Japan, Kidd
estimates.

China's plan to increase its
nuclear-power capacity to 36,000
megawatts by 2020 will require an
estimated 27 new 1,000-megawatt reactors
costing about $2 billion each, according
to a September estimate by Yu Jianfeng,
a director at China National Nuclear
Corp.

Nuclear Programs Halted

Countries such as the U.S. and Germany
have halted their nuclear programs
because of concerns about safety and
environmental risks, highlighted by the
1986 Chernobyl reactor explosion in
Ukraine.

Only a single reactor order has been
placed outside Asia since Chernobyl, by
Finland in 2003, according to the World
Nuclear Association. Finland paid $3.7
billion for a model from Areva's
Framatome ANP nuclear-reactor unit, a
venture with Germany's Siemens AG.

No nuclear plants have been ordered in
the U.S. since 1978, according to the
Vienna-based International Atomic Energy
Agency. Germany agreed in 2000 to
permanently close its 19 nuclear power
plants over the next two decades, after
Chancellor Gerhard Schroeder met an
election pledge to phase out nuclear
power.

While India's nuclear expansion rivals
China's in size, with nine reactors
under construction and another 24
planned, overseas companies don't stand
to profit. They're barred from exporting
nuclear technology to India because it
hasn't signed the Treaty on
Non-Proliferation of Nuclear Weapons,
according to the World Nuclear
Association's Kidd.

Areva's Advantage

That means China will drive growth in
the global nuclear- power market in
coming years.

Areva is relying on its track record to
maintain its lead. The company has
supplied more plants in China than any
other -- including state-owned China
National Nuclear Corp. It employs 3,500
people in the country, compared with
about 15 for Westinghouse, and signed
its first Chinese contract in 1986.

``The Chinese strengthened their nuclear
culture by being in contact with the
French, so there's a familiarity and
understanding,'' says Arnaud de
Bourayne, 59, Areva's president for
China. ``It is potentially the
fastest-growing nuclear market for
Areva.''

Areva is still the most likely winner of
the pending contract, says Manoj Singh,
the Hong Kong-based chief executive
officer for Asia at Deloitte Touche
Tohmatsu.

``Areva clearly has an advantage because
consistency is very important,'' says
Singh, who has been a consultant to
energy companies for 25 years. ``One of
the things the French have done very
well is to standardize designs for
nuclear power plants, and the Chinese
government is trying to adopt that as a
policy.''

Government Help

Like Westinghouse, Areva has gotten
government help in pushing for Chinese
contracts.

CEO Anne Lauvergeon accompanied French
President Jacques Chirac on a trip to
China in October, after China announced
its call for tenders for the reactor
project on Sept. 28, to meet President
Hu Jintao and other Chinese leaders.

During a June visit to Paris by Chinese
Vice Premier Zeng Peiyan, the nations
signed an agreement to cooperate on
technology for future nuclear reactors.
Lauvergeon, 45, attended the signing,
according to an Areva press release.

With or without government backing,
companies seeking to profit from China's
nuclear expansion face obstacles,
Areva's de Bourayne says.

`Very Demanding Market'

China plans to phase out international
participation in its nuclear program in
coming years, and the winning bidder
will have to ensure that the designs and
equipment it supplies can be replicated
locally.

``It's undoubtedly a very demanding
market because of competition and
because of the request for localization
and co- development in China,'' says de
Bourayne, who's based in Beijing. ``It's
basically a state operation.
Decision-making is very complex.''

Westinghouse's experience in
transferring technology to other
countries may give it an advantage, says
Liu, the company's representative in
Beijing.

The company has built reactors in the
U.S., Europe and Asia, most recently
helping South Korea build a
self-sufficient nuclear program in the
same way China aims to, he says.

Westinghouse is offering its new AP1000
reactor, which it says is safer and more
cost-effective than competing models.
The AP1000's safety system eliminates
the need for human intervention in case
of an accident. The reactor has a
modular design that limits construction
time to as little as three years,
according to a Westinghouse press
release.

`Geopolitical' Decision

Framatome's EPR, or European
Pressurized-Water Reactor, takes 57
months to build and cuts electricity
production costs by 10 percent compared
with the most recent model built in
France, according to Areva's Web site.
The EPR also uses 15 percent less
uranium, reducing toxic waste and
radioactivity levels, and is designed to
run for 60 years, rather than 40 for
existing Framatome reactors.

China's choice won't be based on
technology alone, says Pierre Nebout,
who helps manage 20,000 Areva non-voting
investment certificates -- part of the 4
percent of the company that's publicly
traded -- at Paris-based La Cie.
Financiere Edmond de Rothschild Banque.

``Areva's proposal may be rejected not
for technical reasons, but more for
geopolitical reasons,'' Nebout says.
``The role of the Americans is very
significant in China.''