Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Westinghouse A Bankruptcy of Nuclear Proportions

Companies / Nuclear Power Apr 14, 2017 - 02:53 PM GMT

By: STRATFOR

Companies

In any given year, a handful of companies file for Chapter 11 bankruptcy in the United States. Rarely, however, does one of these filings reverberate beyond the boardroom and into the realm of geopolitics. Those that do — Lehman Brothers in 2008, or the "Big Three" U.S. automakers in 2008-10 — usually involve hundreds of billions of dollars. But the next big geopolitically relevant bankruptcy may be on the horizon, and the amount of money involved is tiny next to the collapses of the past decade.


Analysis

On March 29, Westinghouse Electric Co., a subsidiary of Japanese conglomerate Toshiba, filed for bankruptcy. The U.S.-based nuclear power company has been building two state-of-the-art nuclear power plants in Georgia and South Carolina, but it has been plagued by delays and cost overruns. The filing sent Toshiba scrambling to cut its losses by March 31, the end of Japan's fiscal year. The Japanese conglomerate ended up writing down over $6 billion on its nuclear reactor business. But Toshiba's troubles don't end there; the firm is also working to sell off a portion of its chip manufacturing holdings.

The U.S. government is worried about what the sale of Westinghouse could mean for the future of traditional nuclear power in the United States and for nuclear power in China, which is keen to learn the secrets of a Western firm such as Westinghouse. The Japanese government, meanwhile, is wary of how Beijing could benefit in the long term, should a Chinese firm acquire Toshiba's semiconductor unit.

A Setback for the Nuclear Renaissance

Even though the current and previous U.S. administrations have supported nuclear energy — and the first new reactor in the United States in two decades started last October — the future of traditional American nuclear power is not bright. High capital costs, climbing operating costs, sustained low natural gas prices and unfavorable electricity markets all limit its expansion. And with the failure of Westinghouse — one of the two major nuclear power firms in the country (the other, GE, is also scaling back its plans) — the picture looks even bleaker.

Westinghouse's plants in Georgia and South Carolina are supposed to feature its new AP1000 pressurized water reactors, which were designed to be both safer and easier to build. The projects, however, have been hamstrung by setbacks and cost overruns totaling some $3 billion for each project. Westinghouse's bankruptcy filing now puts them in limbo. Though there's still a chance the projects will be completed, it's hard to envision Westinghouse, even if it is sold, fulfilling its one-time plan of building perhaps dozens of plants in the United States.

But all hope is not lost for growth in the U.S. nuclear sector. The difference is that growth, if it is to occur, may come not from traditional nuclear powerhouses, which are expensive and inflexible, but from a new technology: small modular reactors (SMRs). SMRs are reactors smaller than 300 megawatts that are, as the name suggests, built in a modular fashion. In theory, they can be manufactured offsite and then assembled where needed, significantly lowering initial capital costs, one of nuclear power's biggest constraints. Installation can also be done as needed, avoiding potential underutilization of capacity and, again, large capital costs, enabling nuclear energy to serve markets that would otherwise be unreachable.

The U.S. Department of Energy has supported the development of SMRs in the past. Two companies, Babcock & Wilcox and NuScale Power, have received federal funding to develop SMRs in recent years. Babcock & Wilcox has since scaled back its operations, but NuScale is forging ahead. The company recently filed plans with the Nuclear Regulatory Commission to deploy SMRs at the Idaho National Laboratory.  

SMRs are promising, but the first pilot plants won't be operational until at least the mid-2020s. And as with any unproven technology, the costs and benefits aren't yet known and won't be for some time. Supporters have proposed public-private partnerships to aid in the commercialization of SMR technology. But given the uncertainty surrounding the U.S. federal budget and the administration's specific plans for infrastructure, it remains to be seen whether SMR technology will be able to get off the ground. Traditional nuclear power plants would be helpful to bridge the gap, and that is where Westinghouse's bankruptcy will be felt the most in the United States. SMRs may provide the clearest path to a future of nuclear power in the country, but it won't be an easy one.

A Motivated Buyer

The shedding of Westinghouse is not the only part of Toshiba's financial restructuring that has been causing waves. As Toshiba's board approved Westinghouse's filing for Chapter 11 bankruptcy, U.S. officials raised concerns about national security. Chinese corporate espionage has targeted Westinghouse in the past, and U.S. officials are worried that a Chinese firm could simply buy access to the secrets it has tried before to steal.

Japan has concerns as well, though they are centered not on Westinghouse but on the sale of Toshiba's semiconductor unit. On March 30, Toshiba's shareholders voted to split off its NAND flash memory unit. Apple, Amazon, Google and several other U.S. firms expressed interest in acquiring it, as did Asian bidders from South Korea. Toshiba said April 7 that it had narrowed the list of bidders down to 10. But the group still includes Taiwan's Hon Hai Precision (otherwise known as Foxconn), with a bid of $27 billion, which could set the stage for a dispute down the road. Should a Chinese company — or even a Taiwanese company with extensive operations on the mainland — acquire the semiconductor business, it would undermine the competitiveness of Japan's tech sector relative to China's in the long run.

The timing couldn't be much better for Beijing, which is making semiconductor mergers and acquisitions the focal point of its overseas mergers and acquisitions strategy in much the same way it focused on oil and natural gas in the mid-2000s. On March 28, Tsinghua Unigroup, China's largest chipmaker, finalized $22 billion in funding from the China Development Bank and the National Integrated Circuit Industry Investment Fund to build up the country's semiconductor sector and push for global mergers and acquisitions. Tsinghua Unigroup is serious about growth; in January, it announced plans to build a $30 billion fabrication plant in Nanjing. Such growth would pose an existential threat to the semiconductor industries of Japan and South Korea, and the sale of Toshiba's semiconductor business to a Chinese company would only make such a scenario more likely.

None of these potential concerns about the fallout from Toshiba's corruption, mismanagement and financial problems is surprising. The United States has always had an interest in the sale of nuclear-related technology, and Japan's tech sector has long been one of its most important and most competitive industries. But the struggles of Toshiba and the demise of Westinghouse are a rare instance in which a corporate breakdown has important geopolitical consequences.

"A Bankruptcy of Nuclear Proportions is republished with permission of Stratfor."

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2017 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules