The plant will be China's third nuclear power plant and is due to be completed next year, with the project moving ahead of schedule and tight cost-control efforts paying off.

The facility will have two generators with a capacity of 1 million kilowatts each. One of them started commercial operations at the end of May, around six weeks earlier than expected. The remaining generator is due to begin transmitting electricity next January, two months in advance.

Liu Jinhua, general manager of the Liang'ao Nuclear Power Company, told China Daily: "If we move two months ahead, we can pay US$40 million less in loan interest payments alone."

The plant's cost was originally planned to be US$4.025 billion, with bank loans providing more than 90 per cent.

The remaining 10 per cent comes from the revenue of the Daya Bay nuclear power plant - China's first ever. The Daya Bay plant is next to the Ling'ao plant in Guangdong Province's Shenzhen, 50 kilometres from Hong Kong.

Liu said plant officials have also been closely watching international currency and interest rates in an attempt to slash loan costs.

The company has decided to raise 4 billion yuan (US$487 million) from the Chinese bond market later this year.

Liu explained: "The bonds are to further reduce our costs, given that the interest payable on the bond is lower than the interest payable on bank loans at this time. It will also help diversify our capital structure to avoid risk."

Last year, the company borrowed 2.5 billion yuan (US$302 million) from the nation's bond market. This will help the company save about 325 million yuan (US$39.3 million) before the bonds mature in seven years.

Liu Xicai - general manager of China Guangdong Nuclear Power Holding, the Ling'ao plant's parent firm- said the reduced construction costs would make the plant's electricity more competitive.

If construction costs are reduced by 10 per cent, the cost of generating electricity will drop by 5 per cent, Liu said.

But he did not put a precise figure on how much buyers would have to pay for electricity from the Ling'ao plant.

Li Peng, chairman of the National People's Congress Standing Committee, on Tuesday called for the second phase of the Ling'ao plant to begin soon to meet the increasing demand for electricity in Guangdong Province.

The second phase will enable the plant to produce 2 million more kilowatts.

While some doubt the economic viability of nuclear power plants, Zan Yunlong - chairman of China Guangdong Nuclear Power Holding - said the plants can survive government reforms to open the electricity sector to competition.

"Production costs at nuclear power plants are much lower after construction costs have been repaid," Zan said. "The longer they operate, the cheaper their electricity prices can be."

At the Daya Bay plant, production costs dropped by 40 per cent to 3.85 US cents per kilowatt-hour since it began operating in 1994. This compared to an average electricity sales price of 4.6 US cents per kilowatt-hour in Guangdong.

Zan said: "Moreover, taking environmental pollution into consideration, nuclear power plants are much cleaner. They are especially competitive in affluent coastal provinces, which have paid close attention to environmental protection."

(China Daily July 4, 2002)