TOKYO -- The bad nuclear bet that sent Toshiba's net worth into negative territory results from the world's top reactor supplier placing too many chips on aggressive expansion by subsidiary Westinghouse Electric. A look at the history of the business reveals crucial points of growth and abandon.
Toshiba entered the atomic power business in the 1960s with technology provided by General Electric. The Japanese conglomerate worked with Hitachi to supply boiling water reactors to major domestic utilities, one of the first being the Fukushima Daiichi plant operated by Tokyo Electric Power Co. Holdings.
Boiling water reactors are one of the two main types in use worldwide, along with pressurized water reactors. GE, which established the technology in the U.S., served as a sort of mentor to Toshiba. The two parted ways when the Japanese company bought Westinghouse Electric in 2006.
At $5.4 billion, or roughly 640 billion yen at the time, the purchase price was reportedly more than 200 billion yen beyond the maximum that rival Mitsubishi Heavy Industries was willing to shell out. To allay skepticism -- including from then-Mitsubishi Heavy Chairman Takashi Nishioka -- over whether a nuclear deal was worth such a hefty price tag, Westinghouse raced to expand, setting lofty goals for itself.
Westinghouse Chairman Danny Roderick, who also serves as president of Toshiba's in-house energy systems and solutions company, took every opportunity to declare his optimism about the business, targeting orders for 45 reactors by 2030. The clearest evidence of the company's zeal is its push into China, by far the largest market for new nuclear power facilities.
A total of 74 reactors with output totaling 78.25 million kilowatts were under construction worldwide in January 2016, data from the Japan Atomic Industrial Forum shows. Of the eight reactors on which work began in 2015 and 2016, six are in China, one of the few bright spots in a global nuclear market that slowed to a crawl after the 2011 Fukushima Daiichi disaster. Local players in China are gaining steam as well.
Nuclear companies cannot assume their risks will be limited to emerging markets. The proximate cause of Toshiba's massive write-down, now estimated at more than 700 billion yen ($6.11 billion), was the 2015 acquisition of American nuclear services company CB&I Stone & Webster for just under 30 billion yen. Mitsubishi Heavy also faces a lawsuit in the U.S. over a nuclear plant shutdown that could leave it on the hook for as much as $7.6 billion.
Yet many industry insiders warn of hidden risks in China that have yet to surface. Brushing aside the concerns about technology leaks that led Mitsubishi Heavy and Hitachi to think twice about entering the country's nuclear market, Westinghouse dove in headfirst to compete with France's Areva.
Though Westinghouse is becoming too much for Toshiba to handle, finding another company willing and able to take on the task appears difficult. National security considerations make the issue even trickier. Any volunteers "would probably come from China or Russia, but it's very hard to imagine that the U.S. government would agree to that," a former senior official from Japan's industry ministry said.