TOKYO -- The nuclear fuel collaboration that Japan's Hitachi, Toshiba and Mitsubishi Heavy Industries are considering will be watched to see whether it leads to consolidation in reactors, a much bigger business. But each member of the trio has its own challenges to overcome.
The three groups are in final talks to integrate their nuclear fuel businesses as early as spring, The Nikkei reported Thursday.
Since the March 2011 Fukushima nuclear disaster, Japanese reactors have been slow to return to service following safety inspections. A plunge in nuclear fuel sales has prompted the three suppliers to consider consolidation.
Their domestic reactor businesses are kept afloat only by income from maintenance work on existing units amid dim prospects of new construction in Japan. The industry's hopes for growth lie abroad, where many new reactors are being planned.
China's government is promoting that country's nuclear infrastructure exports. To counter this challenge, some in Tokyo want the Japanese trio to work more closely together in order to increase cost-competitiveness and maintain their technological advantages. Prime Minister Shinzo Abe's government has made infrastructure exports a pillar of its economic growth strategy.
Not so straightforward
Amid a bleak business environment at home, consolidation seems to make sense. But the three companies must solve their own problems to make it happen.
Toshiba is strong in boiling water reactors (BWRs), a type of reactor used mostly in Japan. But many of the projects planned around the world call for pressurized water reactors (PWRs). Toshiba's U.S. unit Westinghouse Electric makes PWRs.
Mitsubishi Heavy has its own worries with nuclear partner Areva. The Japanese industrial company has said it is weighing an investment in the French group, but a formal agreement is taking some time to conclude because of the latter's earnings slump.
Mitsubishi Heavy and Areva are co-developing a new type of PWR. The former wants to strengthen the partnership in order to gain Areva's expertise in decommissioning. A number of reactors that Mitsubishi Heavy built for Kansai Electric Power and other utilities are set for retirement. But some observers have expressed concern about investing in the troubled French company.
Meanwhile, Hitachi has seen the projected cost of building reactors in the U.K. through a local subsidiary balloon to 1.3 trillion yen ($12.8 billion) each.
Getting consent from their respective overseas partners -- Westinghouse, Areva and, in Hitachi's case, General Electric -- may also prove a challenge should the trio move to merge their reactor operations.