The Prime Minister of Japan bet heavily on nuclear power for domestic power production and for major export sales to foreign nations. Major Japanese nuclear technology corporations also bet on nuclear power for expansion and profit. Now one of those corporations finds itself in serious financial difficulty related to its nuclear power business.
In 2006, Toshiba bought the Westinghouse nuclear division, one of the biggest manufacturers of nuclear reactors in the world for about five and a half billion dollars. In 2006, the outlook for nuclear power was bullish with plans for nuclear reactor construction on the rise.
The March 2011 nuclear disaster at Fukushima shut down all of Japan's power reactors and cooled public acceptance of nuclear power and investor interest. Nonetheless, the PM was still sold on nuclear power and is pushing to restart many of Japan's power reactors. Many nuclear power plant projects were put on hold around the world while countries studied Fukushima and made changes to their nuclear reactor safety regulations. The nuclear industry including Toshiba experienced a downturn in orders and profits.
In mid-2015, Toshiba became embroiled in an accounting scandal. Toshiba overstated profits by over a billion dollars while understating costs on some projects. Two high-level executives had put serious pressure on subordinates to meet ambitious but unrealistic sales projections. Toshiba responded by replacing eight of its sixteen members of the board of directors. Japan is trying to exert more control over the governance of its large corporations including Toshiba.
At the end of 2015, Toshiba lost about twenty percent of its market value due to a write-down of billions of dollars on its U.S. nuclear subsidiary, Westinghouse. Westinghouse has been working on the construction of new reactors in the U.S. and Toshiba reports serious problems with the competence and productivity of the U.S. workforce resulting on serious cost overruns.
Westinghouse is still assessing the problems and reviewing the finances of the eight reactor projects in the U.S. It is still not known whether or not the problems will impact construction and completion of the eight U.S. reactor projects. Some of Westinghouse problems stem from acquisition of a nuclear equipment firm. The whole nuclear industry is struggling to find skilled workers, maintain quality control and meet increasingly stringent regulatory requirements from national regulators.
All over the world, reactor construction projects are experiencing scheduling delays and cost overruns. It can be difficult to obtain financing for new reactor builds as investors remain skeptical about the future of the nuclear power industry. Downturns in electricity demand, dropping costs for fossil fuels and renewable are having a severe impact on nuclear power expansion. Vietnam recently canceled a nuclear reactor project that had been in the works for years. Other countries are rethinking the need for nuclear power.
With respect to Toshiba, the problems with Westinghouse are so serious that Toshiba is talking about possibly selling its semiconductor division, the most profitable division, to cover its liabilities. Problems with its nuclear subdivision may actually bring an end to this Japanese technology giant. It appears that rosy projections for the nuclear power industry may be fantasy.
