Nuclear reactor manufacturers in Japan are finding it tough to do business abroad, partly because their main potential partner is so caught up in bringing the crippled Fukushima plant under control.
It is often difficult for the companies to win overseas contracts unless they take part in nuclear power generation, in which they have little expertise.
Prior to the nuclear crisis that unfolded in March 2011, the government hoped that Mitsubishi Heavy Industries Ltd., Toshiba Corp. and Hitachi Ltd. would export reactors in tandem with Tokyo Electric Power Co.
TEPCO was expected to provide services related to plant operations.
Tadashi Maeda, managing executive officer at the Japan Bank for International Cooperation and one of the architects of the nuclear plant export strategy, said the 2011 disaster at TEPCO’s Fukushima No. 1 plant shattered initial calculations.
“We planned to go abroad with a package that included assurances on safety and training of engineers,” said Maeda, a former special adviser to the Cabinet. “But with TEPCO out of the picture, all we have is equipment for export.”
Japan is not expected to embark on construction of new reactors after the triple meltdowns at the Fukushima plant, the worst nuclear disaster since the 1986 Chernobyl accident. Overseas markets have become crucial for MHI, Toshiba and Hitachi.
Without TEPCO on hand, however, the companies often need to be involved in plant operations to win overseas orders.
An international consortium that includes MHI on Oct. 29 reached a “broad framework” of agreement with the Turkish government to build four reactors in the Black Sea city of Sinop.
On the same day, visiting Prime Minister Shinzo Abe signed a joint declaration on cooperation in nuclear energy with his Turkish counterpart, Recep Tayyip Erdogan.
The Sinop project, a deal estimated to be worth 2 trillion yen ($19 billion), represents MHI’s first success at exporting nuclear plant technology.
MHI will be responsible for installing the Atmea 1, a new type of reactor developed with French reactor manufacturer Areva SA. It will be the first time for it to do so.
MHI President Shunichi Miyanaga is well aware of the potential risks.
“The project is entirely different from those for domestic electric power companies,” he said. “We will try to identify all the risks involved and solve problems one by one.”
The broad framework is nothing but a verbal agreement. The official contract covering engineering and construction will not be concluded until after MHI completes a two-year study on natural conditions and economic feasibility.
“It will be difficult (to carry out the project) if an active fault is discovered on the site,” said Senior Vice President Terumasa Onaka, general manager of MHI’s nuclear energy systems division.
In particular, the company will have to make a sizable financial investment in operating the Sinop plant.
“We have to reinforce our financial base further (in preparation for the project),” Miyanaga said.
MHI learned a hard lesson from a U.S. nuclear power plant project.
In 2012, the U.S. Nuclear Regulatory Commission suspended operations of the San Onofre nuclear plant in California after cooling water containing radioactive materials leaked from piping for one of the four steam generators MHI supplied.
Southern California Edison Co., the plant operator, went to the International Court of Arbitration in October, demanding MHI pay $4 billion in compensation, including costs for decommissioning the reactors.
The amount is nearly three times as large as MHI’s pretax profit for the year ended March 2013. MHI has argued that the damages be limited to $137 million for the steam generators.
Japan started pushing nuclear plant exports in 2009 but suffered a setback at the end of that year.
A Hitachi-led Japanese consortium lost a contract in the United Arab Emirates to a group of South Korean companies that included Korea Electric Power Corp. and Doosan Heavy Industries and Construction Co.
Up to 370 reactors are expected to be built around the world, particularly in emerging economies, by 2030. The UAE contract offered one of the first bites in those projects.
Hiroki Mitsumata, who was director of the nuclear energy policy planning division at the Agency for Natural Resources and Energy, part of the industry ministry, said the loss upset Japan.
“Samsung was leading in electronics, and Korean films and dramas were all the rage in video content,” Mitsumata said. “We feared that South Korea’s offensive would continue in the nuclear business as well.”
The Democratic Party of Japan, which came to power in 2009, lacked an economic growth strategy.
Maeda of the Japan Bank for International Cooperation, who was close to DPJ heavyweight Yoshito Sengoku, called on him to promote exports of nuclear plants.
“Despite advanced technology, reactor makers have failed to break into global markets,” he said. “We need to export infrastructure packaged with maintenance and services.”
In 2010, the DPJ government under Prime Minister Naoto Kan included “exports of packaged infrastructure” into its new economic growth strategy.
It also appointed Maeda and Harufumi Mochizuki, a former administrative vice industry minister and another advocate of nuclear plant exports, as special advisers to the Cabinet.
At the industry ministry, Takaya Imai, who was deputy director-general of the trade and economic cooperation bureau, spearheaded efforts to promote nuclear plant exports. Imai now serves as secretary to Prime Minister Shinzo Abe.
TEPCO was expected to partner with reactor makers in export projects. The utility adopted overseas expansion as a goal under its new management plan.
However, the troika of the industry ministry, reactor makers and TEPCO ground to a halt when the Fukushima No. 1 plant was devastated by the tsunami spawned by the March 2011 Great East Japan Earthquake.
A Toshiba-led consortium obtained preferential negotiating rights for Turkey’s Sinop project in 2010, but negotiations were suspended after the nuclear disaster and TEPCO eventually pulled out of the group.
Toshiba in 2008 won a contract to build two reactors at the South Texas Project nuclear plant in the Lone Star State, and TEPCO also decided to invest in the project but withdrew after the nuclear disaster.
TEPCO also was unable to play a central role in International Nuclear Energy Development of Japan Co., a joint venture set up in 2010 by utilities and reactor makers under an industry ministry initiative aimed mainly at exporting nuclear plants to Vietnam.
Last year, Hitachi purchased Horizon Nuclear Power Ltd., a British nuclear power generation company. Hitachi will supply four to six reactors and plans to sell its interest in Horizon after its plants begin operations. Still, it will have to be involved in nuclear power generation for a certain period.
Areva, which began exporting nuclear plants before Japanese rivals, knows firsthand about the risks contractors can end up with when things go wrong.
It was sued for damages over construction delays and safety upgrades in a project to build a new type of reactor at the Olkiluoto nuclear plant in Finland. The company was forced to sell its power transmission and distribution division in 2009 to raise funds for compensation.
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