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Toshiba’s Economic Nuclear Meltdown

How Washington Is Fighting For Russia’s Old Europe Energy Market, Forbes, Kenneth Rapoza , 17 May 16

“………Toshiba’s Economic Meltdown

Toshiba’s problems are Westinghouse’s problems. In Europe, going after the Russian market is a survival tactic.

Toshiba used to design and build reactors for half of Japan, also supplying those reactors with fuel. The March 2011 Fukushima disaster lit a match to those service contracts. Toshiba’s Fukushima reactors are decommissioned.

After Fukushima, Germany shut its reactors down, and they also used Westinghouse as a source for fuel rods, the assembly units that store the uranium that ultimately powers the reactor and makes energy. In less than two years, the company lost contracts at 60 reactors.

They were hemorrhaging money. Between 2012 and 2014, Westinghouse Electric’s cumulative operating losses reached $1.43 billion, according to Toshiba. Which means the company has no taxable income and, thus, is not paying taxes in the U.S. until its cumulative profits exceed that amount.

Their fuel fabrication plant in Västerås was on the verge of closing down.

Then the Ukrainian crisis came along. The Russians became super-duper bad guys and energy diversification was quickly put in play. While gas makes the headlines, nuclear power accounts for more than half of Ukraine’s electricity.

In March 2014, shortly after the annexation of Crimea and the first round of sanctions, the European Commission published an energy security strategy that included nukes as part of Europe’s energy diversification away from Russia. The EU issued a grant for $2.2

million to subsidize nuclear fuel diversification for Eastern European reactors. Guess who got the grant?

After the Czech Republic deal, Westinghouse secured a contract with the Bulgarian government to build a new AP1000 reactor at the Kozloduy nuclear power plant. It followed Bulgaria’s Prime Minister Boyko Borisov’s decision to suspend the construction of a two reactor power plant in Belene, a joint project between Bulgaria’s National Electric Company and Rosatom. What became known as the “Belene saga” would later cost the Bulgarians $1.3 billion in payments and legal fees to Rosatom for not honoring a 2008 contract. The Russians, of course, think they were boondoggled.

Borisov practically admitted that the decision to scrap Belene and award the Kozloduy project to Westinghouse was more political than not. During a meeting with the American Chamber of Commerce, the Bulgarian News Agency quoted Borisov saying “We are one. We are friends… We stop Russian planes, we also stop three Russian (energy) projects, and if we aren’t your partners, then who is?”

Cheerleading From The State Department

An Oct. 30, 2015 unclassified State Department emails dated March 28, 2012 from Richard Morningstar, Special Envoy for Eurasian Energy, addressed to Clinton’s Chief of Staff Huma Abedin, showed that Morningstar asked Abedin to pass on the message to Clinton that Bulgarian Foreign Minister Nikolay Mladenov told Morningstar his government had just canceled the Belene nuclear power project with Rosatom. He added that “Westinghouse is talking with the Bulgarians about doing a project at Kozloduy using the Russian reactor,” which probably means being the supplier of fuel rods instead of TVEL. The director of policy planning, Jacob Sullivan, was forwarded the email by Morningstar, to which Sullivan replied, “Not bad work.”

As competition between TVEL and Westinghouse continues, the United States will keep supporting Westinghouse projects, both politically and financially, to diminish the Kremlin’s influence, according to Stratfor.

“It would be wrong to suggest that no political influence takes place in the bidding process,” wrote Trusted Sources energy analysts led by James Henderson in an October 2014 study. 

Nuclear power accounts for 27% of the EU’s electricity generation via 131 units in 16 countries, according to a June 2014 study by the European Commission. Historically, in Eastern Europe, Russian share in nuclear tech market has been nearly 100%. Over the years, the industry has modernized to a point where any third party can build fuel rods to fit a competitor’s reactor.

Westinghouse can build fuel assemblies for Rosatom’s new and old-model reactors and vice-versa, with varying degrees of success and almost always at a higher price. Russia is the cheaper producer of the two, so when countries turn to Westinghouse for the fuel assemblies, they have to pay a premium for diversification.

The Russians have an edge. Rosatom has won all fuel supply tenders in Eastern Europe in the last 10 years, but back home in Russia there are no tenders to be head. None of 35 reactors operated by Rosatom in Russia have fuel suppliers other than TVEL. It’s a monopoly. That’s how they both get volume, money and the data necessary for quality improvement; a luxury Westinghouse does not have.

One source who wished to remain anonymous said Westinghouse is looking for market share in the fuel services markets of East Europe, because, “It’s the only way to prevent their looming insolvency,” this source said. “Their new reactor division is loss-making, the fuel division is their only cash cow and it is not growing and existing margins are getting slimmer and slimmer. We think Westinghouse has spent millions of dollars to include nuclear fuel as part of the energy security narrative, and the current E.U. sentiment against Russia play into their hand.”…….. http://www.forbes.com/sites/kenrapoza/2016/05/17/washingtons-european-energy-security-boondoggle/#4247a5f362ef

May 21, 2016 Posted by Christina Macpherson | business and costs, politics international, USA | Leave a comment