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Toshiba's nuke deal anticipates growing demand

Posted: 10 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Yoshiko Hara? Toshiba? Westinghouse Electric? British Nuclear Fuels?

In a bid to turn its nuclear-power business into a growth driver, Toshiba Corp. has agreed to acquire Westinghouse Electric Co. from British Nuclear Fuels plc, buying shares from BNFL Group USA Inc. and Westinghouse Electric UK Ltd.

The acquisition would add Westinghouse's pressurized-water reactor (PWR) technology to Toshiba's own boiling-water reactor capability, expanding the Japanese company's slate of nuclear-power infrastructure offerings. PWRs are the most commonly used reactor types worldwide.

Electronic devices and digital products have long been the primary drivers of growth at Toshiba, whereas its "social infrastructure" offerings, including nuclear-plant technologies, have constituted a profitable but stable business. But Toshiba now expects to see "large growth outside of Japan," particularly in the United States and China, for nuclear-power infrastructure and thus seized the opportunity to increase its presence in the sector by bidding for Westinghouse, according to Atsutoshi Nishida, Toshiba's president and CEO.

Toshiba's nuclear business currently tallies about $1.7 billion in sales per year. That's about 3 percent of the Japanese company's total annual sales, which are forecast to come in at about $53.3 billion for the fiscal year ending in March. Westinghouse logs comparable annual revenue, of $1.8 billion, from its nuclear-plant technology business. Toshiba is looking to the Westinghouse acquisition and overall growth in the nuclear-power sector to increase its nuclear-plant technology business to about $6 billion by 2015.

Whereas Westinghouse's PWR focus has given it a presence in the largest reactor market by type, Toshiba touts the breadth of its offerings, which include turbines and peripheral equipment as well as reactors. "Toshiba's strength is that it covers the full life cycle of a nuclear plant [from design and construction through maintenance]," said Nishida. "We will be able to offer the total package to Westinghouse's clients as well."

The Westinghouse deal is valued at $5.4 billion and would give Toshiba a 51 percent majority stake. Pending regulatory approval of the acquisition, Westinghouse would become a Toshiba group member company by the fall, according to Nishida.

Toshiba is now formulating its midterm business plan for the start of its 2006 fiscal year. Nishida said the acquisition would not affect the company's investments in other business sectors. "In the midterm plan, we're assuming that the need for investment in semiconductors will intensify, and we've also taken the payment for this acquisition into consideration," he said.

An investment to expand NAND production capacity is expected to be necessary soon, Nishida added. The company's midterm plan for fiscal 2005, released last August, had stated that semiconductor spending would claim about half of its planned total corporate investment of $9.3 billion over the forecast three-year period.

- Yoshiko Hara
EE Times




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