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South Korea’s Kepco might take the risk of buying Toshiba’s troubled nuclear business

toshiba-and-nukeKepco seen as potential buyer for Toshiba’s ailing nuclear unit, Ft.com 5 Mar 17  South Korean group, in contrast to rivals, is willing to look at Westinghouse deal, by: Kana Inagaki in Tokyo, Song Jung-a in Seoul When Toshiba won a fierce battle in 2006 for control of Westinghouse, a US designer of nuclear power plants, it was a victory against its local rival Mitsubishi Heavy Industries.

The two Japanese companies engaged in a bidding war that inflated the acquisition price of Westinghouse from $2bn to $5.4bn — a process that left other would-be buyers of the US company in shock, including South Korea’s Doosan Heavy Industries. A little more than a decade later, another Korean company — state-controlled Korea Electric Power Corporation — has emerged as a possible buyer for Westinghouse, which is reeling from large cost overruns on two US nuclear power plants. Moreover, Kepco may well be the only potential acquirer of Westinghouse that is acceptable to western countries, above all the US.
Toshiba is suffering the worst financial crisis in its history because of Westinghouse’s troubles, and last month said it was willing to sell its controlling shareholding in the US company, as well as reduce its 60 per cent stake in a consortium called NuGen, which is planning to build a new nuclear plant in the UK. South Korea has ambitions to become a leading player in the global nuclear industry, and officials at the country’s energy ministry, and Kepco, are keen to secure work on new power plants following a drought in overseas deals since the company landed a breakthrough $20bn export deal in 2009 to supply the United Arab Emirates with four reactors. Kepco has been in negotiations for months about investing in NuGen, according to people involved in the process, although the scale of the Korean company’s participation has not been finalised. The attraction of the UK, however, is clear: Britain has become an important market for the nuclear industry given that other countries, such as Germany, are phasing out reactors……..
Another Korean government official says there could be an industrial logic to Kepco buying Westinghouse, or establishing some kind of partnership with the US company, because this would provide a means to accelerate the country’s expansion in the global nuclear market. Kepco’s participation in both Westinghouse and NuGen could be essential, say several nuclear experts, because other potential bids from China and Russia risk being blocked by the US and the UK over national security concerns. There are few other obvious bidders for Westinghouse……….
A deal between Kepco and Westinghouse could help propel South Korea towards its goal of becoming an important player in the global nuclear industry. Both companies are on an export drive. On top of the UAE deal, Kepco is aiming to sell six more reactors by 2020. Meanwhile, Westinghouse is trying to drum up sales of the AP1000, its latest reactor design, which is currently only being installed in new power plants in the US and China……..
But bankers say Toshiba may find it hard to sell Westinghouse now — having tried several times already. The four reactors being built in the US using Westinghouse’s AP1000 design are already more than three years behind schedule and, on a combined basis, more than $10bn over their original budgets. These problems were the main factors behind Toshiba’s announcement last month of a $6.3bn writedown on its US nuclear business. Some experts say that, with reduced demand for nuclear power following the 2011 Fukushima disaster, it is questionable whether Kepco would gain anything from buying Westinghouse. “Why should [Kepco] take such big financial risks by taking over a troubled business amid the gloomy industry outlook?” asks Suh Kyun-ryul, professor of atomic engineering at Seoul National University…….https://www.ft.com/content/32f14d76-f8e6-11e6-9516-2d969e0d3b65
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March 6, 2017 - Posted by | business and costs, South Korea

2 Comments »

  1. The phrase should be: No nuclear is that clear?

    Comment by artiewhitefox | March 6, 2017 | Reply

  2. The phrase should be: No nuclear is that clear? and thou dost err with nuclear.

    Comment by artiewhitefox | March 6, 2017 | Reply


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