Japan’s nuclear industry turns focus abroad

General Electric, and Mitsubishi Heavy has forged ties with Areva of France.

Their efforts have won several foreign contracts so far – Mitsubishi sold its third reactor in the US in May – and have given rise to even bigger ambitions. Toshiba wants to double sales of nuclear equipment to Y1,000bn ($11.6bn) by 2015, while Mitsubishi and Hitachi have similarly aggressive goals.

A missing ingredient so far has been government support. “South Korea and China are very active in diplomatic negotiations, but until now Japan has left everything to companies,” Shinji Fukukawa, a former vice-minister in the Japanese trade ministry, told a business forum earlier this year.

Nuclear industry executives blame a lack of state help for several recent setbacks. Last year South Korea surprised many in the industry by striking a deal to build four reactors in the United Arab Emirates, beating Japanese and European competitors. This spring Russia’s state-owned nuclear company trumped a Japanese consortium for the right to build the first nuclear plant Vietnam.

In both cases the winners benefited from high-level official salesmanship, in the form of lobbying visits by Lee Myung-bak, South Korean president, and Vladimir Putin, Russian prime minister. Japan only sent lower-level cabinet ministers.

Now Tokyo is looking to step up its diplomatic game. The government in June published a national growth plan calling for a co-ordinated, state-led effort to sell infrastructure abroad, on the heels of an April agreement with engineering groups and electric utilities to form a joint marketing company to export nuclear technology.

At the end of June the Japanese foreign ministry announced the start of talks with India on a civil nuclear energy pact that would pave the way for Japanese groups to sell in that country.

Several policies are under discussion to buttress the “all Japan” approach, including expanded trade insurance for plant builders and more generous aid for countries that buy Japanese nuclear technology.

“What we want most of all is more access to Japanese financing for customers,” says an official at one reactor builder.

As in many industries, Japanese manufacturers are competing more on technology than price. They have built some of the first so-called third-generation plants, which are reckoned to be safer and more efficient than earlier designs. Toshiba has partnered with the Bill Gates-backed TerraPower to develop a futuristic “travelling-wave” reactor that would produce next to no waste.

Japanese groups still face challenges. One is Japan’s spotty domestic nuclear safety record: its Monju fast-breeder reactor was shut for 10 years until May after a sodium leak; Tokyo Electric Power temporarily closed all 17 of its reactors in 2003 after it was caught doctoring safety reports; and Kashiwazaki-Kariwa, the world’s biggest nuclear station, has still not fully restarted after an earthquake in 2007.

Most of the problems have been the result of careless operation rather than shoddy equipment, analysts say. But they may still put off buyers.

Another issue, shared with European makers, is price. The reactors sold by South Korea to the UEA were estimated to have cost as much as 20 per cent less than rival offerings per unit of power.

Finally there is the fragmentation of Japan’s nuclear industry, in contrast to its rivals’ “national champion” model. In addition to three separate power plant makers there are trading companies, which have traditionally brokered foreign deals, and utilities, which play an active role in designing and building plants.

“There are all these companies,” says an executive at component maker that supplies the industry. “How is the government supposed to sort out who gets to bid on what, or how to divide up the profits?”