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Business Trends

Risks mount for global nuclear plant builders

Expanding market masks surging costs

TOKYO -- Cost overruns stemming from delays and stronger safety measures have emerged as an existential threat to nuclear plant contractors.

At first glance, the global market appears to be growing at a strong clip. Seventy-four reactors with an aggregate output of 78.25 million kilowatts were under construction as of January 2016, according to the Japan Atomic Industrial Forum.

But Toshiba's nuclear business booked about 250 billion yen ($2.21 billion) in losses during the fiscal year ended last March. The bulk came from Westinghouse Electric, acquired in 2006.

The segment faces massive losses this fiscal year that may climb to roughly 700 billion yen. These will stem in large part from a nuclear construction unit purchased by Westinghouse in 2015.

Mitsubishi Heavy Industries is also facing a roughly 700 billion yen claim from a U.S. power company over faulty equipment.

Construction costs for a single reactor have now approached 1 trillion yen since the adoption of stricter safety measures after the March 2011 earthquake and tsunami disaster in Japan. Chinese and South Korean rivals have also engaged in stiff price competition, cutting into margins.

Such reasons informed the decision by Siemens to quit the nuclear game. General Electric, which merged its nuclear business with Hitachi's, has signaled reluctance regarding expansion.

Mitsubishi Heavy has nevertheless expressed a healthy appetite for investing in the nuclear industry, including a stake in French reactor builder Areva NP. "Through future investments, we will be able to ensure contributions to technological upgrades," President Shunichi Miyanaga said Friday.

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