Chicago Bridge to Build China's Nuclear Plant - Analyst Blog

China has been increasingly resorting to nuclear power as its main source of power, given its advantages compared to the power generated from coal or wind. To help China in the endeavor, Chicago Bridge & Iron (CBI) was recently given the charge to jointly build nuclear power plants in China.

Chicago Bridge announced on Oct 1 that it has agreed with CPI's Power Engineering Company, (a subsidiary of China Power Investment Corporation) to form a joint venture to construct nuclear power plants in China. Chicago's shares reacted positively to the news and 1.1% to $70.78 on Oct 2, 2013 but declined 0.4% on Oct 3, 2013.

According to the agreement, Chicago Bridge is required to provide engineering, procurement, construction management, commissioning, project management and technical support services for the nuclear plants that are to be constructed.

China Power Investment Corporation is China's biggest power generation company, which owns one of the three nuclear power plants in China. These power plants are planned and funded by the China Power Investment Corporation.    

The shift toward nuclear energy started during the 1970s and by 2005 this industry has developed rapidly in China. According to a report by the National Energy Administration (NEA), China is expected to make nuclear energy the foundation of its power-generation system in the next "10 to 20 years". The country intends to add about 300 GWe of nuclear capacity over that period. A report from National Development and Reform Commission (NDRC) mentioned that 3240 MWe nuclear capacity would be added in 2013.

Since 2012, the State Council of China has permitted construction of four new nuclear power plants and it is expected that the state Council will approve about 30 more nuclear power plants by 2020. This rapid increase is primarily to meet the nuclear power capacity set in China's Mid- and Long-term Development Plan for Nuclear Power.

This joint venture will benefit Chicago Bridge to strengthen its capacity and capability in the nuclear power market. Chicago Bridge acquired The Shaw Group in Dec 2012 in order to increase its presence and expand its competence in the nuclear power market.  

Chicago Bridge & Iron Company N.V. provides conceptual design, technology, engineering, procurement, fabrication, construction, and commissioning services to energy and natural resource industries worldwide. It currently carries a Zacks Rank #3 (Hold).

Other companies in the energy sector worth considering at the moment are Micheal Baker Corporation (BKR), Foster Wheeler AG (FWLT) and Quanta Services Inc. (PWR). Micheal Baker has a Zacks Rank #1 (Strong Buy), while Foster Wheeler and Quanta Services carry a Zacks Rank # 2 (Buy).