Kepco rules out buying Westinghouse stake

Korea Electric Power Corp has ruled out buying Toshiba’s controlling stake in Westinghouse, but confirmed it is interested in joining the NuGen consortium that is planning to build a new UK nuclear plant.

The decision by the South Korean state-run utility is a blow to Toshiba’s efforts to find a buyer for its troubled US nuclear subsidiary as the Japanese conglomerate grapples with the worst financial crisis in its history.

Cho Hwan-eik, Kepco’s president, told reporters on Wednesday: “We have no plan to acquire Toshiba’s stake [in Westinghouse] . . . there is no role for us there”. 

Kepco had been seen by industry experts as the only potential acquirer of Westinghouse that would be acceptable from a national security perspective. Analysts note that prospective suitors from China and Russia risk being blocked by the US and the UK, while other possible bidders including Mitsubishi Heavy Industries and Hitachi have already ruled themselves out.

However, Mr Cho said that Kepco would be keen to take Toshiba’s 60 per cent stake in NuGen, pending more clarity on the sale conditions.

We have no plan to acquire Toshiba’s stake . . . there is no role for us there

“The basic sales structure has not been set yet although intense negotiations are going on between the UK and Japan. We will be the first to jump into the race once the sales conditions including debt and equity are decided,” he said.

Kepco has been in talks for months about investing in NuGen, according to people involved in the process, with Toshiba looking to scale back as part of its restructuring. 

The South Korean company is keen to enter the UK nuclear market as part of a goal to become the world’s third-largest exporter of nuclear reactors by 2030.

It landed a breakthrough $20bn deal in 2009 to supply the United Arab Emirates with four reactors, but has failed to win a single commercial contract since, despite its reputation for cost competitiveness and reliability. Kepco now is eyeing potential nuclear deals in South Africa and Saudi Arabia, in addition to the UK project, aiming to sell six more reactors by 2020. 

Many experts had thought Kepco would be interested in taking over Westinghouse, as a means to accelerating its expansion in the global nuclear market. Kepco previously has said it would review the possibility if it were approached by Toshiba. 

Some analysts said the downturn in the nuclear sector — and mounting uncertainty over the true scale of the difficulties facing Westinghouse, following last month’s disclosure of a $6.3bn writedown — may have dimmed the appeal for Kepco of Toshiba’s US subsidiary.

“Global interest in building new reactors is decreasing, especially in advanced countries, and we don’t know how much further losses Westinghouse would incur,” said Suh Kyun-ryul, professor of atomic engineering at Seoul National University.

“Korea is hungry for more overseas work but it already has its own competitive technology. There are few incentives for Kepco to buy Westinghouse, given the huge financial risks involved.”