China Fire Bags $10M Deal - Analyst Blog

China Fire & Security Group Inc. (CFSG), a provider of industrial fire protection systems in China, won a contract to supply Fire Detection Systems for China Nuclear Power Engineering Co. Ltd (CNPEC). With a contract value of $10 million, it stands to be the largest contract from CNPEC till date.

As per the contract, China Fire will supply fire detection systems to key sections of CNPEC's nuclear power plant in Taishan City – Nuclear island (NI), conventional island (CI) and to the balance of plant (BOP). China Fire will be responsible for the entire process, which includes designing, manufacture, installation and maintenance of the system.

For the NI portion of the contract, China Fire will serve as a fire-detection system designer and equipment provider. Revenues from this part of the contract are valued at $8 million. Under the CI and BOP section of the contract, China Fire will serve as a fire-detection equipment provider to earn $2 million.

The construction of the Taishan plant – initiated in December 2009 – is estimated to be complete by 2013 or within a period of three years. China Fire aids Taishan plant in becoming the first nuclear power station to adopt the Evolutionary Power Reactor ("EPR") Technology in China.

EPR technology is a third-generation nuclear power technology designed and developed in Europe with an objective to attain greater safety and enhanced economic competitiveness compared to previous nuclear technologies.

In anticipation of EPR becoming the mainstream technology over the next few years, we expect China Fire’s expertise in ERP technology to strengthen its market position.

Based in, Shenzhen, Guangdong, CNPEC is a subsidiary of China Guangdong Nuclear Power Group (CGNPG), the largest of the three nuclear power companies in China.

CGNPG expects to construct five new power-generating projects inclusive of the Taishan plant, with a total installed generating capacity of approximately 21,000 MW. China Fire has been working with CNPEC since 2008 and is in anticipation to bid for the corresponding fire-extinguishing contracts. We believe China Fire will gain from the long association with CGNPG.
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