December 31, 2016 1:00 pm JST

Toshiba teams with Chinese firm on Turkish nuclear plant bid

Japanese hopes for Chinese money mixed with concern about tech leaks

RYOSUKE HANAFUSA, Nikkei staff writer

Toshiba's Westinghouse is working on the first new U.S. nuclear reactors in around three decades amid an export push by the Japanese nuclear industry.

TOKYO -- A Japanese, American and Chinese consortium is negotiating with the Turkish government on a nuclear power plant project, an arrangement that could upend how Japan's atomic power industry does business abroad.

Westinghouse Electric, a U.S. unit of Toshiba, is partnering with China's State Power Investment in an effort to win an order for four cutting-edge third-generation reactors, estimated at 2 trillion yen ($17 billion). A source at the consortium said it hopes to reach a deal with Ankara in 2017.

The Chinese side will supply funds, while Westinghouse will provide equipment, Westinghouse Chairman Danny Roderick explained. Toshiba and Westinghouse aim to use Chinese money to secure the order without taking stakes in the project themselves.

The arrangement seeks to work around the high financial hurdles posed by such projects. The consortium will have to recoup the roughly 2 trillion yen cost via income from power generation over decades. Taking on such a risk alone would be difficult, particularly in an emerging country that is politically unstable and whose currency could swing wildly. Finding a local investor would also be tricky.

But Chinese businesses have abundant capital and an interest in getting their hands on Japanese and American nuclear energy technology. They also hope to build an overseas track record to help cultivate an atomic energy sector at home more quickly. The arrangement benefits all three countries involved, Roderick said.

But some -- including the Japanese government -- worry about the prospect of China gaining access to Japanese technology, which would put Chinese companies in a better position to become major global players in the future. "We weren't asked anything in advance," a bewildered Japanese government source said of the partnership.

"It's unreasonable to hang on to the same technology for decades," a Westinghouse and Toshiba insider argued. "We just have to develop the next technology."

This attitude contrasts markedly with that of Mitsubishi Heavy Industries, which views China as a rival. The company plans to build pressurized-water reactors for a nuclear plant in Turkey's Sinop, an order for which a Japanese public-private team vied with a Chinese group.

Consortium members including Mitsubishi Heavy will invest in the project, with the government providing support via the Japan Bank for International Cooperation. But a feasibility study highlights the difficulty of turning a profit on the project.

With new construction looking unlikely in Japan, builders of nuclear equipment see exports as essential for growth as well as maintaining their technology. Companies must decide whether to join forces with Chinese peers at the risk of leaks or to compete with them to the end.

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 8,139.87M
Shares: 4,237.60M

Mitsubishi Heavy Industries, Ltd.

Japan

Market(Ticker): TKS(7011)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 13,161.86M
Shares: 3,373.64M

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