Westinghouse sale update December 23, 2005

Asahi.com published an article on 23 December titled Westinghouse sale could tilt balance in global nuclear power industry.

The story mentions that the final decision for the sale of BNFL’s Westinghouse unit could come next month, and that the final price is now expected to range between 200 and 300 Billion yen. At today’s exchange rate, that means that the expected sale price is between $1.8 and $2.6 Billion USD. When we first reported on this sale back in July, the expected price was about $1.8 Billion USD. A sale at the higher end of the range would represent an 80% increase in value in a six-month period.

Both Mitsubishi Heavy Industries and Toshiba are in the running for winning the bid. GE and the Shaw Group also remain as potentially successful bidders.

It is likely that one reason that the sale has not yet closed is that Westinghouse still has an open bid for a Chinese project that could result in an order of between zero and four new reactors. The size of that potential order is certainly large enough to have a significant impact on the company’s value. With the electrical power industry’s follow-the-leader tendencies, that order might lead to many others, completely altering, as the referenced article states, the balance of power in the global nuclear power industry.

As of December 20, 2005, the decision for that sale had been indefinitely postponed. The Chinese, ever the tough bargainers, appear to be holding out for better deals. See China’s $8 bln nuclear deal postponed indefinitely. There is another version of the story at Nuclear talks delayed over disagreements

It must be exceedingly difficult for negotiators to conduct their due diligence with such a large unknown in the mix of assets that must be evaluated.

One confusing story also emerged about 10 days ago about a US congressman from Texas who was questioning the sale on the basis of the fact that Westinghouse might end up being sold to a non-US company. The last time I check, Westinghouse was being sold by BNFL, which is not only a foreign company but one that is completely owned by a foreign government. That article was published on Forbes.com under the headline of US congressman questions potential sale of Westinghouse – report.