Energy

CNNC may make record bond issue for expansion

By Henry Sanderson (China Daily)
Updated: 2011-03-17 10:46

BEIJING - China National Nuclear Corp (CNNC), the nation's largest atomic plant operator, may issue a record amount of bonds to finance expansion, even as Japan battles to prevent a reactor meltdown, according to its top official.

"The nuclear accident won't have any serious impact on China's nuclear industry and we won't alter our long-term development plans," CNNC President Sun Qin said in an interview in Beijing on Monday. The company, based in Beijing, plans to sell more bonds to fund overseas acquisitions and to diversify its funding sources, he said.

CNNC sold 4 billion yuan ($609 million) in notes this year, matching a record it set in 2009, according to data compiled by Bloomberg. The relative yield on its 4.9 percent 2019 notes rose 8 basis points to 197 basis points since Friday's earthquake damaged reactors in Japan, according to Chinabond prices. The spread on similar-maturity 4.375 percent euro-denominated bonds sold by Areva SA, the largest provider of nuclear equipment and services, widened by 55 to 188, according to prices from BNP Paribas SA.

China is relying on alternative energy sources such as nuclear power as it tries to sustain growth and minimize environmental damage. The nation wants at least 15 percent of its energy mix to come from non-fossil fuels by 2020 and is building more atomic plants to help meet that goal. The Japanese Prime Minister, Naoto Kan, warned on Tuesday that the danger of further radiation leaks from a crippled nuclear power station in Fukushima prefecture is rising.

Last month, CNNC Nuclear Power Co, a unit of China National Nuclear Corp, sold 2 billion yuan in five-year bonds, which were priced to yield 5.41 percent, according to Bloomberg data. Nuclear Power Qinshan Joint Venture, which is managing the expansion of a similarly named plant, plans to issue 600 million yuan in one-year notes on March 17, according to Chinabond data.

Related readings:  China freezes nuke plants approvals  China to boost nuclear power capacity  Booming nuclear power industry boosts domestic firms  Nuclear firms to generate investor interest in listing

China has about 13 operational nuclear power reactors and is building more than 25, according to a report on the World Nuclear Association's website. Additional reactors are planned to provide more than a tenfold increase in atomic capacity by 2020, the report shows. China Nuclear Engineering Group Co may start building a nuclear plant in Shandong province, the China Business News reported on Wednesday, citing General Manager Mu Zhanying.

The world's fastest-growing major economy will need more than 1 trillion yuan to build reactors by 2020, the Time Weekly reported in May, citing Cao Shudong, a deputy director at the National Energy Administration.

"We're quite comfortable that in the longer-term China will not turn away from nuclear power stations as a source of base power," said David Lennox, a resource analyst at Fat Prophets in Sydney. "It's been a major incident, but it's not been a disastrous one," he said, comparing the unfolding crisis in Japan with the 1986 Chernobyl disaster in Ukraine.

Economic growth that's averaged about 10 percent over the past five years helped drive inflation to 4.9 percent last month, the Chinese government said last Friday. Five-year credit-default swaps on Chinese government debt has risen 10.5 basis points this year on concern anti-inflation measures will threaten growth. The contracts were 4 basis points higher on Tuesday, CMA prices in New York show.

Credit-default swaps insure debt against nonpayment, and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The yield on China's 2.68 percent government bond due in November 2013 fell one basis point to 3.23 percent on Tuesday, Chinabond prices show. The yield on India's three-year bonds was unchanged at 7.88 percent. Similar-maturity bonds yield 6.91 percent in Russia and 12.88 percent in Brazil. These nations comprise the so-called BRIC group of emerging economies.

One-year interest-rate swaps, or the fixed cost needed to receive the floating seven-day repurchase rate, rose 7.5 basis points to 3.27 percent as of 12:20 pm in Shanghai on Wednesday, according to data compiled by Bloomberg.

Bloomberg News