US firm withdraws from Hitachi plant in Wales

 August 17, 2018

U.S. firm pulls out of building Hitachi nuclear plant in Britain

http://www.asahi.com/ajw/articles/AJ201808170035.html

Major U.S. construction firm Bechtel Corp. is to withdraw from its key role in building a nuclear power plant in Britain due to concerns over the Hitachi Ltd.-helmed project’s profitability, sources said Aug. 16.

Bechtel made the decision based on its assessment that the drastic rise in construction costs would make it hard to make money on the project, the sources said.

The withdrawal deals a blow to Tokyo-based Hitachi, which lacks experience in nuclear power plant construction. The conglomerate could now face further difficulties in financing the project.

The Japanese government supports the construction project as an “export of nuclear power generation technologies,” but even so, its future is becoming more and more uncertain.

Hitachi plans to build a nuclear power plant equipped with two reactors on the island of Anglesey in Wales. Overall costs are expected to reach about 3 trillion yen ($27 billion), mainly due to measures to meet safety standards strengthened globally after the 2011 accident at the Fukushima No. 1 nuclear power plant.

According to the sources, however, the overall costs estimated by Bechtel are higher than Hitachi’s, making it impossible for Bechtel and Hitachi to agree on the price tag.

As a result, Bechtel decided to withdraw from its key role in construction and only offer a consulting service.

In 2012, Hitachi purchased a British nuclear power plant operator, Horizon Nuclear Power Ltd., to export its nuclear power generation technologies as a whole.

It was the first time for Hitachi to preside over the construction of an entire nuclear power plant, including not only reactors but also reactor buildings and related facilities.

Hitachi then formed a consortium with Bechtel and major Japanese engineering company JGC Corp. in 2016. Bechtel was chosen because it had constructed nuclear plants in the United States.

The consortium was expected to steer the nuclear plant’s design and construction, with Bechtel taking the key role in the project. Now, a question mark hangs over whether Hitachi will be able to find a new partner that can replace Bechtel.

An idea has emerged that Horizon Nuclear Power, now a subsidiary of Hitachi, will be in charge of the construction while receiving advice from Bechtel and Japanese electric power companies.

One Hitachi executive played down the significance of Bechtel’s withdrawal from its role in construction.

“It only means that roles of companies will change. The impact to the project is not big,” the executive said.

However, if Horizon replaces Bechtel, it faces the risk that the construction costs will become higher than anticipated.

Hitachi is aiming to lower its stake in Horizon from the current 100 percent to less than 50 percent as a condition for the start of construction of the nuclear plant, and so it is asking other companies to invest in Horizon.

But if other companies are concerned over Horizon’s risk, they will hesitate to invest in it. As a result, Hitachi will face bigger difficulties in raising funds for construction and proceeding with the project.

(This article was written by Keiichi Kitagawa and Hisashi Naito.)