Hitachi Extends Nuclear Push with $1.12 Billion U.K. Deal

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 [e-mail] and Konstantin Rozhnov at [e-mail]

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