Nuclear test

Westinghouse's Boat to China Has Sailed

U.S. concern over bids for the nuclear-plant builder looks misplaced.
At Closing, May 25th
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The Chinese are coming after America's nukes.

That's the fear of the administration of President Donald Trump, at any rate. U.S. officials are so concerned that Toshiba Corp. will sell its bankrupt Westinghouse nuclear-reactor unit to a Chinese company that they're looking to block any such sale or find a white knight from an allied country instead, people familiar with the matter told Jennifer Jacobs, Saleha Mohsin and Jennifer A. Dlouhy of Bloomberg News.

It's somehow appropriate that an administration which in many ways appears to be hankering after the 1950s subscribes to a view of atomic power straight out of a Tom Lehrer song:

Still, the reality of modern nuclear technology suggests such anxieties are overblown.

Target Market

More than half of the market for Westinghouse's AP1000 technology is in China

Source: World Nuclear Association

Note: Shows planned and under-construction plants, as defined by the World Nuclear Association. Totals for Kazakhstan, Turkey, Bulgaria, and the U.K. include planned and proposed plants. Total for U.S. includes 4 Duke Energy plants which are unlikely to be built but haven't been formally canceled. Totals also include 2 Chinese and 2 Turkish plants using the AP1000-derived CAP1400 design.

For one thing, Westinghouse has been foreign-owned for a very long time. Many of the people who voted in last year's presidential election were babies in March 1999, when the British state-owned nuclear company BNFL purchased the business from CBS Corp. It was sold on to Toshiba in 2006.

For another, Beijing is far from ignorant of what Westinghouse is selling. To the contrary, most of the market for its AP1000 reactor design is in China, where the government has made the system central to its plans to double atomic generation capacity by 2020.

It's not just about buying reactors off the shelf, either. China wants the ability to build its own nuclear generators, so state-owned enterprises have been paying to use Westinghouse's intellectual property ever since 2007, when the company signed an estimated $8 billion deal to sell four AP1000 reactors and transfer associated technology to its Chinese partners -- all with the blessing of the George W. Bush administration.

Making Things Doesn't Pay

All of Westinghouse's operating income comes from its fuel and services units

Source: Company presentation

Note: WECTEC operating income included within "Construction".

To be sure, there are probably parts of the business that foreign investment regulators may be cautious in ceding. Westinghouse's previous U.K. and Japanese owners, after all, are close U.S. allies, and China is a strategic rival. There may well be "dual-use" elements of intellectual property that would fit both civil and military applications. Its nuclear-plant maintenance and fuel-supply business would also give any new owner an insight into the operation of U.S. generators that governments might not want to grant to Beijing.

That's no reason for exceptional measures to apply in this instance, however. The Committee on Foreign Investment in the U.S., or CFIUS, is quite capable of imposing conditions that would allow a deal to go ahead while preserving national security interests. That happened as recently as 2013, when Cnooc Ltd. agreed to give up control of Nexen Inc.'s Gulf of Mexico oilfields to allow a $15.1 billion takeover to go ahead.

Westinghouse's Chapter 11 bankruptcy is complicated enough without the wild card of Washington locking some of the likeliest buyers out of the market for ill-thought-out reasons.

If a sale is blocked outright after CFIUS's lenient approach to the purchase by the British and Japanese, foreign investors will be entitled to believe that double standards apply.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    David Fickling in Sydney at

    To contact the editor responsible for this story:
    Paul Sillitoe at

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