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Hitachi to ask UK for further funding as nuclear project stalls

Company struggles to find other Japanese parties willing to invest

Britain's Prime Minister Theresa May attends a press conference at 10 Downing Street. Allocating more funds to the Hitachi project could prove difficult for the embattled leader.   © Reuters

TOKYO -- Hitachi will ask the British government for additional support for a nuclear power project in Wales as it struggles to recruit other Japanese investors amid international headwinds for atomic energy.

The company will consider scrapping the project, worth more than 3 trillion yen ($26.6 billion), should negotiations with London fail to reach a conclusion by January.

Aborting Japan's last active proposal to build an overseas nuclear power plant would deal a blow to the government's plan to expand exports of energy-related infrastructure, as similar projects face setbacks around the world.

"It is a fact that it is facing a difficult situation," Hitachi Chairman Hiroaki Nakanishi said at a news conference Monday. "I told the British government that we are already reaching the limit."

Nakanishi was speaking in his capacity as chairman of the Japan Business Federation, the nation's top business lobby, better known as Keidanren. The news conference was held after reports emerged that Hitachi is considering scrapping the project altogether due to the difficulty of securing funding from Japanese companies.

A rendering of Hitachi's planned nuclear plant in Wales. (Courtesy of Hitachi)

With aid from the British government, Hitachi's nuclear power segment intends to build two reactors on the Welsh island of Anglesey through British subsidiary Horizon Nuclear Power. It was scheduled to make a decision on the project's economic feasibility sometime in 2019 but will probably push that decision forward by more than six months as the business environment worsens.

Nuclear power is losing its competitiveness as the price of renewable energy falls. The U.K. government also plans to buy electricity from the Wales plant for lower prices than those charged by other nuclear power facilities.

The Japanese government has promoted overseas nuclear power plant construction as a pillar of its strategy to boost infrastructure exports. Since the 2011 Fukushima disaster, no new reactors have been approved inside Japan. To maintain nuclear expertise and talent, Japan's public and private sectors have teamed up to sell the technology abroad.

But ground has not broken on any project to date. A Japanese public-private consortium led by Mitsubishi Heavy Industries is planning to scrap a nuclear power plant in Turkey, for instance. Should the nuclear industry lose its legs, it could affect the restating and decommissioning of existing plants.

Hitachi has said it will move forward with the project if it can limit its exposure by reducing its 100% stake in Horizon Nuclear to around 30%. The U.K. has pledged more than 2 trillion yen in loans for the project, with the remaining cost of about 900 billion yen to be split among investments from Hitachi, the British government and business as well as the Japanese government and businesses.

Lining up Japanese investors, however, has proved to be a challenge. Tokyo Electric Power Co. Holdings, also known as Tepco, is reluctant to provide funding. Chubu Electric Power and other Japanese companies probably will follow its lead. Without other investors on the horizon, Hitachi is asking the British to share more of the burden.

Aside from Tepco and Chubu Electric, Hitachi also solicited investments from Japan Atomic Power, the Japan Bank for International Cooperation, the Development Bank of Japan and other parties. But the industrial conglomerate is having trouble gathering the necessary 300 billion yen.

The British government is no position to acquiesce to these demands. Having already pledged around $18 billion in loans, it risks backlash from the public by providing further financial support. Prime Minister Theresa May can ill afford another fight as her government risks collapse over negotiations to leave the European Union.

At a separate news conference held by Hitachi, Toshiaki Higashihara, the company's president and CEO, did not attempt to downplay the situation. "Hitachi is a private company," he said, "and there is a limit to how much risk it can take. If the project is not economically rational, it is possible that the project will be halted."

Higashihara added that the final investment decision will be made by the end of 2019.

Hitachi Executive Vice President and Executive Officer Toshikazu Nishino also spoke, saying the company "has not given up yet," though it recognizes "the negotiations are not easy."

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