China cancels plans for Areva reactors at Yangjiang

BEIJING, Aug 22 (Reuters) China has cancelled plans for French state-run firm Areva to build two reactors at Yangjiang in China's Guangdong province but is in talks about using them at another site, a source said today.

China would press ahead with four reactors using domestic technology at Yangjiang and was looking at another plant in the same power-hungry southern province for the French firm's contract, the industry source told Reuters.

''A formal launch of construction at the Yangjiang plant is possible within the year,'' he said, declining to give further details.

The 5 billion dollars deal was unexpectedly agreed in February, weeks after a US rival appeared to have won a competition that dragged on for more than two years. But an official signing due on July 31 apparently did not take place.

An Areva spokesman said the two sides were in advanced discussions about the reactors but declined to comment on whether they were now looking at a new site. The French Economy Ministry also said discussions were continuing.

Analysts have said the deal was as much political as economic, as Beijing struggled to smooth troubled relations with the United States without alienating long-standing friend France.

The preliminary agreement covered a total of 3.2 gigawatts of capacity, with the reactors slated for completion around 2013.

Beijing plans to spend some 50 billion dollars on building around 30 nuclear reactors by 2020, raising its installed nuclear capacity to 40 GW -- nearly enough to power Spain.

That would be around 4 per cent of all power, compared with only about 2.3 per cent at present but still far behind three-quarters in France or one quarter in Japan.

It has nine working reactors, but has been sucking up technology from around the world -- including Canada and Russia -- to boost a domestic industry that Beijing hopes will one day match national prowess in construction of coal plants.

REUTERS AK KN1502