Hitachi freezes UK nuclear project

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Hitachi’s Toshiaki Higashihara at a press conference in Tokyo. Work on a nuclear plant in Wales was suspended after Hitachi said it had been unable to agree financing with the UK government. (AP Photo)
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The president of Japanese company Hitachi, Toshiaki Higashihara, leaves at the end of a press conference at the company’s headquarters in Tokyo. Hitachi said it would freeze construction of its stalled nuclear power station in Wales due to problems financing the project. (AFP)
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An artists impression of the Wylfa nuclear plant in Anglesey, which was to be built by Hitachi. Hitachi said today it would freeze construction of its stalled nuclear power station in Wales. (AFP)
Updated 17 January 2019
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Hitachi freezes UK nuclear project

  • The suspension comes as Hitachi’s Horizon Nuclear Power failed to find private investors for its plans to build a plant in Anglesey
  • Hitachi had called on the British government to boost financial support for the project to appease investor anxiety

TOKYO/LONDON: Japan’s Hitachi Ltd. decided on Thursday to freeze a 3 trillion yen ($28 billion) nuclear power project in Wales as Britain scrabbles for a way to exit the EU, dealing a blow to UK plans for the replacement of aging plants.
The suspension comes as Hitachi’s Horizon Nuclear Power failed to find private investors for its plans to build a plant in Anglesey, which was expected to provide about 6 percent of Britain’s electricity.
“We’ve made the decision to freeze the project from the economic standpoint as a private company,” Hitachi said in a statement, adding that it had booked a write-down of 300 billion yen.
Hitachi had called on the British government to boost financial support for the project to appease investor anxiety, but turmoil over the country’s impending EU exit limited the government’s capacity to compile plans, people close to the matter have previously said.
Hitachi had banked on a group of Japanese investors and the British government each taking a one-third stake in the equity portion of the project, the people said. The project would have been financed one-third by equity and rest by debt.
“It is now clear that further time is needed to develop a financial structure for the Horizon project and the conditions for building and operating the nuclear power stations,” Hitachi said.
With the clock ticking down to March 29, the date set in law for Brexit, the UK is now in the deepest political crisis in half a century as it grapples with how, or even whether, to exit the European project it joined in 1973.
Prime Minister Theresa May’s two-year attempt to forge an amicable divorce was crushed by Parliament this week in the biggest defeat for a British leader in modern history, deepening uncertainty for potential investors.
The withdrawal of the Japanese conglomerate could leave the nuclear newbuild industry open to Russian and Chinese state-owned companies as Western private firms struggle to compete.
China’s General Nuclear Services, an industrial partnership between China General Nuclear Power Corp. (CGN) and French utility EDF, plans to make a number of investments in Britain’s nuclear power sector, most notably the Hinkley Point C project in southwest England.
CGN also intends to deploy the first Chinese-designed reactor for use in Britain at a plant in Bradwell, Essex.
The UK government said that despite negotiations with Hitachi, they failed to reach an agreement. The focus for the government was about driving  down costs and maximizing value for consumers and the taxpayer.

 

The UK government remains committed to the nuclear sector and is reviewing alternative funding models for future projects and will give an update this summer, it added.
Britain wants new nuclear plants to help replace its aging fleet of nuclear and coal plants coming offline in the 2020s, but high up-front costs have deterred construction.
Another Japanese firm, Toshiba Corp, scrapped its British NuGen project last year after its US reactor unit Westinghouse went bankrupt and it failed to find a buyer.
Hitachi stopped short of scrapping the Anglesey project in northern Wales. The company will continue discussions with the British government on nuclear power, it said.
The nuclear write-down wipes off the Horizon unit’s asset value, which stood at 296 billion yen at the end of September.
Horizon Nuclear Power said it would take steps to reduce its presence but was keeping the option open to resume development in the future.
“Wylfa Newydd on Anglesey remains the best site for nuclear development in the UK and we remain committed to keeping channels of communication open with the government and our other key stakeholders regarding future options at both our sites,” said Duncan Hawthorne, chief executive of Horizon.
However, analysts and investors viewed the suspension as an effective withdrawal and saw the decision as a positive step that has removed uncertainties for the Japanese conglomerate.
Hitachi bought Horizon in 2012 for £696 million ($1.12 billion), from E.ON and RWE as the German utilities decided to sell their joint venture following Germany’s nuclear exit after the Fukushima accident.
Hitachi’s latest decision also further dims Japan’s export prospects.
Mitsubishi Heavy Industries Ltd. has effectively abandoned its Sinop nuclear project in Turkey, a person involved in the project previously told Reuters, as cost estimates had nearly doubled to around 5 trillion yen.

FASTFACTS

$28bn — Value of proposed nuclear power project in Wales


Microsoft tops $1 trillion as it predicts more cloud growth

Updated 30 min 58 sec ago
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Microsoft tops $1 trillion as it predicts more cloud growth

BENGALURU/SAN FRANCISCO: Microsoft Corp. on Wednesday briefly topped $1 trillion in value for the first time after executives predicted continued growth for its cloud computing business.
The Redmond, Washington-based company beat Wall Street estimates for quarterly profit and revenue, powered by an unexpected boost in Windows revenue and brisk growth in its cloud business which has reached tens of billions of dollars in sales.
Microsoft shares rose 4.4% to $130.54 in late trading after the forecast issued on a conference call with investors, pushing the company ahead of Apple Inc’s $980 billion market capitalization. The companies and Amazon.com Inc. have taken turns in recent months to rank as the world’s most valuable US-listed company.
Microsoft’s stock has gained about 23% gain so far this year, after hitting a record high of $125.85 during regular trading hours.
Under Chief Executive Satya Nadella, the company has spent the past five years shifting from reliance on its once-dominant Windows operating system to selling cloud-based services.
Azure, Microsoft’s flagship cloud product, competes with market leader Amazon Web Services (AWS) to provide computing power to businesses.
Growth in that unit slowed to 73% in the third quarter ended March 31 from 76% in the second quarter. Mike Spencer, Microsoft’s head of investor relations, said the decline was roughly in line with the company’s estimate.
Christopher Eberle, a senior equity analyst with Nomura, said that with Azure, “one should assume a slower rate of growth as we move forward, simply due to the law of large numbers.” Still, Azure will bring in $13.5 billion in sales in fiscal 2019 with an overall growth rate of 75%, he estimated. “I can’t name another company of that scale growing at these rates.”
Microsoft tops tech rivals such as Amazon in market capitalization on some days despite having less revenue, partly because most of its sales is to businesses, which tend to be steadier customers than consumers. A growing proportion of Microsoft’s software sales are billed as recurring subscription purchases, which are more reliable than one-time purchases.
Microsoft’s earnings per share of $1.14 beat expectations of $1 according to IBES data from Refinitiv.
Windows licensing revenue from computer makers grew 9% year over year, beating expectations after a 5% decline in the previous quarter. Spencer said a shortage of Intel Corp. processor chips for PCs that many analysts expected to last into this summer had been resolved earlier than expected, allowing PC makers to ship more machines.
Microsoft’s “commercial cloud” revenue — which includes business use of Azure, Office 365 and LinkedIn — was $9.6 billion this quarter, up 41% from the previous year but down slightly from the 48% growth rate the previous quarter.
Microsoft’s so-called “intelligent cloud” unit, which contains its Azure services, posted revenue of $9.65 billion, above Wall Street estimates of $9.28 billion, according to IBES data from Refinitiv. Chief Financial Officer Amy Hood said that unit could reach $11.05 billion in revenue in the fiscal fourth quarter.
The “productivity and business process” unit that includes both Office as well as social network LinkedIn had $10.2 billion revenue versus expectations of $10.05 billion.
Microsoft’s latest results contained two weak spots.
Its gaming revenue was up only 5% versus 8% the quarter before, which Spencer attributed to less revenue from third-party game developers and the fact that many gamers are delaying purchases of Microsoft’s Xbox console because a new model is expected soon.
Sales of the company’s Surface hardware grew 21% versus 39% the quarter before, also because customers waited for updated hardware they expected to be released soon.
Total revenue rose 14% to $30.57 billion, beating analysts’ average estimate of $29.84 billion according to IBES data from Refinitiv.
Net income rose to $8.81 billion, or $1.15 per share, from $7.42 billion, or 96 cents per share, a year earlier.