Hitachi Ltd. is set to acquire Britain's Horizon Nuclear Power, underscoring the company's shift of focus to the nuclear plant sector overseas.
Hitachi Ltd. is set to acquire Britain's Horizon Nuclear Power, underscoring the company's shift of focus to the nuclear plant sector overseas.The move comes as no surprise as Japan's other nuclear plant manufacturers are also struggling after last year's disaster put a potentially permanent halt to domestic construction of new facilities.The disaster at the Fukushima No. 1 nuclear power plant also led to the suspension of operations at almost all of Japan's reactors, resulting in a sharp drop in the need for inspection and maintenance, previously a major source of revenue for Hitachi's nuclear sector.The drop in that revenue was a key reason Hitachi's nuclear sector recorded a loss for the fiscal year that ended in March, possibly the first time that has happened since the company's early years in the nuclear business, according to a company official.Masaharu Hanyu, Hitachi vice president and executive officer who oversees the nuclear sector, said, "Because we have many new plant projects in Japan, the suspension of construction work after the Fukushima accident directly affected our revenues."Hitachi is in charge of construction of the Oma plant in Aomori Prefecture, which is to be operated by Electric Power Development Co., the No. 3 reactor of Chugoku Electric Power Co.'s Shimane plant, and the No. 1 reactor at Tokyo Electric Power Co.'s Higashidori plant in Aomori Prefecture.Construction costs for a single nuclear reactor are said to run between 400 billion yen and 500 billion yen ($5 billion and $6.3 billion). While payments are made as construction work progresses, suspension of construction means the company receives no revenues.Hitachi has already completed the pressure vessel that is scheduled to be installed at the Oma plant. The huge steel structure, measuring about 20 meters in height, is still in storage at the Kure plant in Hiroshima Prefecture where it was manufactured. The company must continue spending time and money maintaining the quality of the vessel even though it is unsure of exactly when it will be able to install the structure.Hitachi has recently won contracts for projects it has not handled in the past, such as preliminary work to decommission reactors at the Fukushima No. 1 plant and reinforce anti-quake measures at other nuclear plants.However, a company official said, "That is not even close to enough to make up for the huge decrease in revenues."Hitachi received a further blow from a recent referendum in Lithuania that cast a shadow on plans to build a nuclear plant there.The decision to acquire Horizon from two German companies is intended to give Hitachi the opportunity to handle a new power generation project and acquire the technological know-how for power generation and transmission needed for expanding its operations overseas.Japan's other nuclear plant manufacturers are also facing difficulties as a result of the Fukushima nuclear accident.Mitsubishi Heavy Industries Ltd.'s nuclear sector recorded a 60-billion yen drop in revenues in the fiscal year that ended in March. The sector had revenues of 310 billion yen in the previous fiscal year, and company officials expect revenues to fall a further 40 billion yen in the current fiscal year.The company's Kobe plant, which manufactures bulky pieces of nuclear equipment, has been unable to compile a production plan for next year and beyond. The Kobe plant has about 2,000 people on its payroll, or about half of the company's entire nuclear sector. With no prospects for new orders in the near future, company officials are considering sending some of those workers to the aircraft sector temporarily.Mitsubishi handled maintenance work at 24 nuclear reactors, or close to half of the total, but with only two reactors now in operation in Japan there has been a sharp decrease in contracts for such work.At Toshiba Corp., an official said revenues in the nuclear sector have remained unchanged after the Fukushima nuclear accident. The official said this was due to revenue from Westinghouse Electric Co., which was acquired in 2006.Westinghouse's earnings abroad now account for the majority of Toshiba's revenues in the nuclear sector.Toshiba itself, however, has been directly affected by the Fukushima accident. Just as it seemed set to win a contract to construct a nuclear plant in Turkey, Turkish officials scrapped the project after the scale of the Fukushima disaster became apparent.Toshiba is now competing with a South Korean company for the contract.In August, Turkish officials expressed concern that Toshiba was considering the construction of a boiling water reactor similar in type to one at the Fukushima No. 1 plant. They made clear they did not want one built in Turkey.Because of similar concerns elsewhere, Toshiba is now moving to use the pressurized water reactor that Westinghouse manufactures in seeking contracts overseas.Japanese nuclear plant manufacturers will not only have to overcome the negative publicity from the Fukushima accident, but also fierce competition from rivals in South Korea and Russia that have the strong backing of their respective governments for the export of nuclear plants.