NUCLEAR PROSPECTS

IMPLODING INVESTMENT RETURNS:

More outages at British Energy's nuclear plants
James Moore, 21 December 2006 (UK Independent)
- Just as the market was beginning to think that British Energy was finally turning the corner, the company has come out and dashed everyone's hopes again after admitting yesterday that it faced a "worst case scenario" at two of its ageing nuclear power stations that will wipe £100m from its profits.

- The troubled nuclear operator was forced to admit that units at its ageing Hunterston B and Hinkley Point power stations would not be back online until March of next year. That date represents the costliest of three possible scenarios…outlined…when it emerged that cracks were appearing in boiler pipes at the stations.
- British Energy also revealed that further inspections had revealed a small number of defects on boiler tailpipes…
- The upshot of all this is that the company will lose nine terrawatt hours of electricity output in the current financial year…
- The shares responded by tumbling 35.5p to 538.25p as investors' hopes were brought back down to earth with a painful bump…
- The two plants will still only be operating at 70 per cent efficiency when the work is completed. The company will then have to decide whether the most cost-effective option is to undertake further work…or whether simply to continue running them…

- High energy prices bailed British Energy out when it reported last month, as production fell well short of targets…The company is hoping that it will be able to capitalise on the Government's controversial decision to "go nuclear" to help cut Britain's spiralling carbon emission levels, but the benefits are likely to be a long time in coming, and it is likely to take at least 10 years before any new plants are brought online. Most of British Energy's existing plants will have reached the end of their useful lives by 2023.

YET STILL:

Toshiba-Westinghouse Takes China Nuclear
Kenji Hall, December 19, 2006 (Business Week)
- Toshiba CEO Atsutoshi Nishida had little time to savor his victory in nabbing Westinghouse Electric. Within hours of the handover from British Nuclear Fuels in October, analysts were grilling Nishida about his plans for Westinghouse. Most of the comments criticized him for agreeing to a whopping $5.4 billion price for the 77% stake in Westinghouse and for his optimistic 17-year plan to recoup the investment.

- But the Nishida-bashing may ease up a bit after Westinghouse's multibillion dollar deal in China. On Dec. 16, Westinghouse said it won a contract to build four 1,000 MW nuclear plants for China, edging out France's Areva, the world's biggest nuclear engineering outfit. The facilities are part of China's plan to supply energy to an industrializing beltway that runs along the coast…
- Nuclear power accounted for less than 2% of the country's power supply last year…By 2020, China expects to spend $50 billion on more than 30 new reactors, adding to nine 1970s-era ones operating now and quadrupling power generation from nukes…

- China would spend upwards of $8 billion. That's a huge coup for Toshiba…The Japanese company's expertise lies in boiling-water reactors…One reason Toshiba went after Westinghouse was to get at the Pittsburgh-based company's pressurized-water-reactor technology as a way of expanding business overseas…
- By 2020, Toshiba expects 130 orders for new power stations worldwide, and estimates that the Westinghouse unit alone can win at least 20. In addition to the four in China, they're counting on 16 coming from the U.S…Toshiba is also hoping to ride a nuke buildup that's likely to gain speed in fast-growth economies such as India, Brazil, and Romania. Adding Westinghouse to its books could allow Toshiba to rake in nearly $6 billion in sales in the power-generation business by 2015, from around $3.4 billion…

- Having both technologies has another benefit: It gives Toshiba more flexibility in bidding for jobs. As prices of natural gas, coal, and oil rise and calls for green energy sources grow louder, more countries are expected to view nuclear energy as an attractive option. Those countries won't likely want to depend too heavily on any one type since that could leave them at risk of a blackout if problems or defects surface…
- Investors applauded news of the deal in China, nudging shares of Toshiba Plant, the nuclear unit that trades separately from the chipmaking and consumer-electronics giant, 3% higher in Tokyo trading on Dec. 18…
- The truth is, Toshiba's earnings will likely benefit almost immediately from Westinghouse's business…While Toshiba won the first big gig in China, there's plenty to do in order to ensure it keeps the winning streak going.