Sunday, April 13, 2008

To Hell with the Format War

Toshiba has bigger fish to fry.

Don’t waste time shedding any tears over Toshiba’s losing out to Sony in the next generation high- definition DVD format war. The electronics giant is moving boldly into other fields. Increasingly, the electronics giant is putting its business emphasis on the worldwide revival of nuclear power.

Of course, Toshiba has long been active in constructing nuclear power plants in Japan. Now it is moving into other countries and investing in the full spectrum of the nuclear fuel cycle, from the mining of uranium to fuel fabrication to nuclear power plant design and construction.

Toshiba’s first major new nuclear initiative came two years ago when it purchased the Westinghouse Corp from British Nuclear Fuels for $4.2 billion. That gave the company access to the Westinghouse-designed light water reactor type that is a staple of nuclear power production worldwide.

The acquisition meant that Toshiba is competitive in the construction of the two most popular versions of light water reactor plants in current operation, boiling water reactors (BWR) and pressurized water reactors (PWR). Virtually all of France’s extensive nuclear power comes from Westinghouse-designed plants built under license.

Since moving under the Toshiba umbrella, Westinghouse has receive billions of dollars worth of orders for new plants in China. And now it is moving into the reviving and potentially very lucrative American market for nuclear power plants. Major power utilities in the United States have been discussing plans to build more than 30 or more new nuclear power plants, and Toshiba is well-placed to meet those needs by promoting orders for its own advanced BWR and the Westinghouse PWR.

In March the company formed Toshiba America Nuclear Energy Co. to boost orders for its PWRs and BWRs in the US. The same month it teamed up with the Texas-based NRG Energy, which has plans to build two new nuclear power plants. Meanwhile, Toshiba said this month that it expected to receive orders for four new Westinghouse-designed plants, two each from Scana Corp. in South Carolina and Southern Corp. in Georgia.

These would be the first nuclear power plant orders in the US in nearly 30 years. Nuclear plant construction came to a virtual halt in a miasma of safety worries, stemming from the 1979 Three-Mile Island accident, and horrendous construction cost-overruns.

But the nuclear reactors vendors, such as Westinghouse, have not sat idly by during this extended down period. Westinghouse has developed what it calls its AP1000 design which has enhanced safety features and is constructed in a modular design mode that, the company says, reduces costs and construction lead times.

Meanwhile, Toshiba is moving to secure stable supplies of uranium. Last year it acquired a 22.5% stake in a consortium led by the Marubeni Corp. to develop two uranium mines in Kazakhstan. The deal gives it the rights to up to 600 tons of uranium annually. Toshiba thus becomes the first nuclear-power plant manufacturer to participate in a project to develop uranium mines.

Japanese electric power utilities view Kazakhstan as the new uranium El Dorado. Whereas Japan now imports only about 2% of its uranium from the central Asian country, it is estimated that by 2015 it will be buying 20-30% from making Kazakhstan one of its primary suppliers if not the leading supplier. Japan now imports most of its uranium from Australia and Canada.

The Kazakhstan uranium project was a fruit of a big Japanese trade mission to Astana, the Kazakh capital, about a year ago led by the Minister of Economy, Trade and Industry (METI), Akira Amari. He took with him about 150 government and industry officials.

Three major deals were concluded at the meeting of which the most far-reaching was the venture between the Marubeni Corp., Tokyo Electric Power Co. (TEPCO), Chubu Electric Power, and Tohoku Electric Power and Kazatomprom, the state-owned atomic power company.

The project is for the development of the Kharasan 1 and Kharasan 2 uranium mines in southern Kazakhstan. They are expected to yield about 5,000 tons of uranium per year by 2014 when they are in full production. Of this, the Japanese are entitled to 2,000 tons, or about 20 per cent of the country’s 2005 consumption. The projects are in the production-testing stage.

Kazakhstan produced 6,637 tons of uranium in 2007, a more than 20 per cent increase over the 5,281 tons produced the previous year. It aims to produce 15,000 tons annually. It has proven reserves of about 1.5 million tons, or about 19% of the globe’s total proven reserves.

Toshiba has striven to cement its “strategic partnership” with Kazakhstan by letting it in on its valuable Westinghouse property. It announced that it is reducing its stake in Westinghouse from 77% to 67% and selling it to Kazatomprom, the state-owned nuclear company, for about $540 million.

The company is reportedly also negotiating to purchase Nuclear Fuel Industries, Japan’s largest maker of nuclear fuel assemblies and the only company in Japan that makes fuel for both pressurized and boiling water reactors. That acquisition would place Toshiba in all areas of the nuclear fuel cycle from mining uranium, making it into fuel and designing and building the power plants that burn it.

But, of course, Toshiba isn’t the only Japanese giant wanting to cash in on nuclear power’s revival. Mitsubishi Heavy Industries (MHI) has teamed up with the French nuclear monopoly Areva to market and build new nuclear power plants. In March it announced plans to build new nuclear power plants in Europe using the Areva- designed European Advanced Pressurized Water Reactor. It is the first foray by a Japanese firm into the European nuclear market.

More agreements worth several billion dollars with MHI to supply reactors with fuel were signed April 11 while France’s Prime Minister Francois Fillon was in Japan for a short visit. His mission was heavily weighted toward nuclear power cooperation. He brought with him Anne Lauvergeon, chief executive officer for Areva.

After meeting with Japanese Prime Minister Yasuo Fukuda, Fillon and his entourage flew to northern Honchu to inspect the Rokkasho nuclear fuel reprocessing plant, built in part with French technology. It is expected to go into commercial operation next month.

Japan is planning to build thirteen new nuclear power plants. The National Advisory Committee for National Resources and Energy predicts that nuclear power’s share of electricity production will increase from the current approximately 20% to nearly 50% by 2030.


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