Toshiba Said to Buy Majority Stake in Nuclear Fuel Company

By Megumi Yamanaka

March 30 (Bloomberg) -- Toshiba Corp., Japan’s largest supplier of reactors, plans to buy a controlling stake in a nuclear fuel supplier to help compete with global rivals for new atomic power plants, officials said.

Toshiba’s Westinghouse Electric Co. seeks to buy more than 50 percent of Nuclear Fuel Industries Ltd. from Sumitomo Electric Industries Ltd. and Furukawa Electric Co., said two officials close to the negotiations who declined to be named before an announcement. Yuichiro Horiba, a spokesman at Osaka- based Sumitomo Electric confirmed the talks and said the companies have yet to reach a decision.

Better access to fuel may help Toshiba win orders as competition with France’s Areva SA and an alliance between Hitachi Ltd. and General Electric Co. intensifies. Nuclear power generation is set to increase as developing countries led by China and India build more reactors to meet demand and cut carbon emissions blamed for global warming.

“It’s more profitable to package reactors with the fuel,” Fujii Tomoyuki, an analyst at Okasan Securities Co., said by phone from Tokyo today. “Customers don’t want to take risks associated with the nuclear fuel business, and offering them together will help win orders.”

Toshiba spokeswoman Hiroko Mochida and Furukawa spokesman Toshinori Kimura declined to comment.

The two officials didn’t say how much Toshiba may pay for the proposed stake. The Yomiuri newspaper reported yesterday that Toshiba will buy all of Nuclear Fuel Industries at a cost of more than 20 billion yen ($205 million).

Hitachi Venture

Toshiba wants to buy a stake in Nuclear Fuel Industries partly because of concern that the company may be pushed out of another fuel venture with General Electric and Hitachi, one of the officials said.

Toshiba and Hitachi each own 24.5 percent of Global Nuclear Fuel Japan Co. while General Electric holds 51 percent. General Electric and Hitachi merged their nuclear energy business in July 2007, a year after Toshiba bought Westinghouse.

Toshiba, which is forecasting its first net loss in seven years, is focusing on nuclear energy as the global recession cuts profit from semiconductors, its main business. The company aims to win orders to build 39 reactors by 2015, it said in the mid-term business plan unveiled in January.

Shares in the company have tumbled 42 percent in the last six months, outpacing the 27 percent decline in the benchmark Topix index. The stock fell 8 percent to close at 263 yen at in Tokyo.

Nuclear Fuel Industries was formed in 1972 and sells atomic fuel rods to companies including Tokyo Electric Power Co. and Kansai Electric Power Co., the country’s biggest utilities. The company operates one plant at Ibaraki, north of Tokyo, and another in Osaka.

The world needs 32 new nuclear power plants a year to meet a goal of halving emissions by 2050, International Energy Agency Executive Director Nobuo Tanaka said in June.

India plans to add 40,000 megawatts of nuclear capacity by 2020, while China has increased its goal to 75,000 megawatts from a previous target of 40,000 megawatts, the Shanghai Securities News said today.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.