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Hitachi, Toshiba, Mitsubishi Heavy near nuclear fuel tie-up deal

Nuclear fuel is lowered into the No. 1 reactor at the Sendai power plant in Kagoshima Prefecture.

TOKYO -- Three major Japanese companies are in final talks to integrate their nuclear fuel businesses as early as spring, as Hitachi, Toshiba and Mitsubishi Heavy Industries aim to keep those operations afloat even while most of the country's nuclear reactors remain idle.

Making nuclear fuel involves packing enriched uranium into rods, which are then grouped to form the core of a reactor. The three companies have supported Japan's utilities for many years, constructing nuclear reactors and providing the entire supply of fuel.

But ever since the 2011 Fukushima disaster, most reactors in Japan remain offline due to tougher safety requirements. With all of their nuclear fuel businesses in the red, the companies see the current setup as unsustainable.

The integration would let the trio cut costs by streamlining manufacturing bases and other related operations. They are expected to form a joint holding company for their businesses and will consider eventually merging them into one entity.

Preparations already have begun. Mitsubishi Heavy bought shares in Mitsubishi Nuclear Fuel from such partners as France-based Areva, raising its stake in the company from 35% to 95%. Hitachi will gain a majority share in the Japanese unit of Global Nuclear Fuel, a joint venture with partners including General Electric. Toshiba plans to invest directly in Nuclear Fuel Industries, in which it now holds a majority stake through U.S. subsidiary Westinghouse Electric. The three potential partners are taking control of the nuclear fuel businesses to ensure a smooth integration.

Annual sales for each fuel company are believed to total tens of millions of dollars, half the figure from before the 2011 earthquake and tsunami. The earnings deterioration has impeded the development of safety mechanisms as well as personnel training. The hope is that the integration will let the businesses turn enough profit to sustain operations even if only a few reactors are running.

But building new reactors in Japan will be a challenge, meaning Hitachi, Toshiba and Mitsubishi Heavy also need a plan to keep their reactor businesses profitable in the medium to long term. There has been talk of the trio eventually joining hands in this field as well.

(Nikkei)

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