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Financial crisis brings meltdown in Toshiba’s nuclear power plans

by Christina MacPherson

Toshiba’s nuclear power hopes in meltdown The Australian
, REBECCA SMITH, KOSAKU NARIOKA, The Wall Street Journal, December 30, 2016 Toshiba seemed poised to profit from a global nuclear power revival when it paid $US5.4 billion to win a bidding war for Westinghouse Electric in 2006.

Today, that bet threatens to sink the venerable Japanese conglomerate, as cost overruns and missed deadlines on nuclear-reactor projects around the world have forced it to warn investors that it may soon have to report billions of dollars in losses.

Toshiba lost a fifth of its market value on Wednesday and its stock fell another 15 per cent early yesterday in Tokyo as panicked investors rushed to sell shares. The news of the nuclear writedowns came just as Toshiba was beginning to emerge from an earlier accounting scandal……

Westinghouse’s woes help explain why the nuclear industry has seen its dreams of global growth sputter. Until recently, the company was regarded as the industry’s front-runner, the only nuclear supplier to have landed contracts for its next-generation reactor in both the US and China.

But a series of missteps and unexpected problems have snarled nuclear projects by Westinghouse and rivals including Areva and General Electric.

Fifty-four reactors are under construction in 13 nations, and 33 are badly delayed, according to the World Nuclear Industry Status Report, an independent annual assessment. Blunders have afflicted projects regardless of location, reactor design or construction consortiums.

To lower costs and speed construction times, Westinghouse and its competitors came up with cookie-cutter plant designs in which major sections would be built as modules in factories and then hauled to plant sites for final assembly. Gone was the customisation that added expense.

But the strategy appears to have backfired. “Supply-chain issues just moved from the plant sites to the factories. It didn’t solve the basic issue of quality control,” said Mycle Schneider, a nuclear expert based in Paris. And cookie-cutter designs meant flaws got replicated.

In France, Areva is trying to get to the bottom of a scandal involving falsified records for critical components that have wound up in nuclear plants there and in other countries, including the US. The problems appear to stretch back decades and to have gone unnoticed despite supposedly strict government supervision. Areva has said it is co-operating with investigators from France and other nations.

“There’s a world-wide problem with managing these megaprojects,” said Edwin Lyman, senior scientist for the Union of Concerned Scientists in Washington, DC. “Managers grossly underestimated the time and cost of construction.”………

It isn’t clear if Toshiba’s difficulties would have an impact on the eight reactors it is trying to complete in the US and China, but its disclosure suggests the situation is worse than previously understood.

In the US, Westinghouse was providing reactor components for nuclear plants in Georgia and South Carolina being built by utilities Southern and SCANA.

At the site of Southern’s Vogtle 3&4 reactors going up in rural Georgia, there have been rumours of financial problems for months, said Will Salters, business manager for the union IBEW Local 1579.

He said the site now employs about 500 of his electricians but the union recently received notice that there would be a hiring freeze pending a review.

“We’ve been hearing for months they were broke and had to meet certain milestones by Southern to get paid,” Mr Salters said……

Toshiba is already on a Tokyo Stock Exchange watchlist because of the accounting scandal that forced it to take a $US1.3bn writedown for its nuclear business in November 2015.

At the time, it acknowledged that it had overstated its profit for seven years.

Christina MacPherson | December 30, 2016 at 8:55 am | Categories: business and costs, Japan | URL:

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