Hitachi Ltd. said Tuesday it will buy British nuclear venture
Horizon from Germany's RWE AG and E.ON AG, extending a drive into
potentially lucrative infrastructure businesses while cutting
exposure to low-margin consumer electronics operations.
The Horizon acquisition, priced at GBP696 million ($1.12
billion), comes as the Japanese industrial electronics giant aims
to more than double revenue from its nuclear power business within
10 years. It involves the construction of four to six new nuclear
plants in two U.K. sites.
Hitachi's nuclear business still makes up only a tiny
portion--less than 2%--of its revenue. But the company has been
reshaping itself in an expensive restructuring process that means
backing away from consumer electronics, an area where many of its
Japanese peers are struggling, to focus on global infrastructure
projects such as building power plants and rail lines.
Analysts say the acquisition will help Hitachi bolster its
nuclear power business, which has lost momentum since the Fukushima
Daiichi disaster in March 2011, and to globalize its operations by
finding new growth opportunities in markets such as the U.K.
Tatsuro Ishizuka, Hitachi vice president and executive officer,
didn't provide any details about the cost of building the plants
envisioned as part of the Horizon project.
At a news conference in London, he said the U.K. government
hasn't set the guaranteed price for electricity to be produced at
the plants, but Hitachi hopes "the price will decided at a fair
level."
The deal is vital for the U.K. government, which has placed
nuclear power at the core of its energy policy as it plans new
power generators to replace old coal and nuclear power
stations.
Responding to questions about whether a Japanese company was an
appropriate buyer following the nuclear-plant disaster there,
Edward Davey, the U.K.'s secretary of state for energy and climate
change, said he is "extremely happy" that a Japanese company bought
Horizon.
The proposed reactor design is more advanced than at Fukushima,
he said, adding that the British public has great confidence in the
U.K.'s safety regime.
Hitachi led a consortium with Canada's SNC-Lavalin in securing
Horizon, beating a rival bid by Westinghouse Electric Co., a unit
of Toshiba Corp.
In a statement, Hitachi President Hiroaki Nakanishi described
the deal as the start of "a 100-year commitment to the U.K."
The company said its plans for Horizon involve building two to
three 1,300-megawatt power plants, using its advanced boiling-water
reactor technology, at each of Horizon's sites at Wlyfa in Wales
Oldbury in England. The first unit is scheduled to go on line in
the first half of the 2020s, Hitachi said.
Hitachi also intends to assemble parts of these power plants in
the U.K.
But Hitachi isn't a utility company and would like to find an
operator for the plants by inviting partners who would buy stakes
in Horizon, the company's executives said.
"We are a plant maker. We want a place to build a nuclear power
plant. We have bought (Horizon) in exchange for letting us build
advanced boiling-water reactors," Masaharu Hanyu, nuclear systems
general manager for Hitachi, said in Tokyo.
He also said that U.K. government approval for the technology
would alone take some five years.
"This [deal] is a significant positive development for Japanese
nuclear companies in a new, but also established and significant
nuclear market," said George Borovas, head of nuclear projects at
global law firm Pillsbury, referring to the U.K.
However, he said that if nuclear power is phased out in Japan,
it could create issues for the long-term competitiveness of
Japanese nuclear vendors because potential customers could question
their viability for long-term commitment and partnerships.
"Nuclear is a very long-term commitment so it's something that
the Japanese nuclear vendors and the government has to consider,"
he said.
Though the U.K. government has been advocating the development
of nuclear power, the recession in Europe has made capital harder
to come by for such costly projects.
In March, German utilities RWE and E. ON said they were
scrapping plans to develop new nuclear projects in the U.K. and put
their Horizon joint venture up for sale. RWE cited the global
economic crisis, which has made capital for such large and costly
projects scarce, and the accelerated phaseout of nuclear power in
Germany, which has hit revenue there, as reasons for the pullback
in the U.K.
Selina Williams in London and Kenneth Maxwell in Tokyo
contributed to this article.
Write to Kana Inagaki at kana.inagaki@dowjones.com and
Konstantin Rozhnov at konstantin.rozhnov@dowjones.com
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