A Chinese-owned Westinghouse? Washington is worried
Anxiety is brewing in Washington as government officials wade into the bankruptcy of Westinghouse Electric Co. with concerns that Chinese investors might make a play for the nuclear firm.
According to Bloomberg, the Trump administration is working to identify American or allied buyers for the Cranberry-based firm, which employs about 11,500 worldwide, including 4,500 in the Pittsburgh region.
Officials told the news service that the administration is afraid investment groups with “hidden Chinese backing” might surface during the bankruptcy process, which began with Westinghouse filing for Chapter 11 protection on March 29.
“Among the chief concerns in the event of a Chinese purchase is the disclosure of nuclear technological secrets that could be used for either military or civilian purposes,” Bloomberg reported. “The government has legal authority to regulate corporate acquisitions involving sensitive national security technology.”
Westinghouse hasn’t been under U.S. ownership in two decades. It was sold to British Nuclear Fuels Ltd. in 1998 and to Toshiba, a
Japanese conglomerate, in 2006.
Still, “There are a lot of reasons why a Japanese takeover of Westinghouse doesn’t raise people’s temperatures the way that a Chinese takeover of Westinghouse would,” said Mark Hibbs, senior fellow at the nuclear policy program of the Carnegie Endowment for International Peace, who put the chances of a Chinese entity taking over Westinghouse at “virtually nil.”
Westinghouse’s roots and breadth across the globe — its designs are the backbone of half of the world’s 430 reactors and it provides fuel and maintenance services to many of them — means that the reliability and security of a huge amount of infrastructure is at stake in the deal, Mr. Hibbs said.
It is also unclear what a Chinese-linked takeover would mean for Westinghouse’s presence in the U.S. and in Pittsburgh.
“When the Japanese bought Westinghouse, it seems like they let Westinghouse run Westinghouse,” said Paul Murphy, a managing director in Gowling WLG’s Energy Group. “Everything was run out of Cranberry and it still was very much a U.S. company.
“If the Chinese buy Westinghouse, you really do wonder what does that mean for jobs in Cranberry,” he said.
Sen. Bob Casey, a Pennsylvania Democrat, said in a statement on Wednesday that he will “insist that new leadership at the company act in the best interests of the workers who have made Westinghouse a success over many years.”
He added: “China is a serial cheater on trade and is unlikely to put the interests of the workers first.”
In 2014, the U.S. Department of Justice indicted five Chinese military hackers for stealing Westinghouse emails and documents related to the Westinghouse AP1000 reactor, even as Westinghouse and a Chinese utility had a deal to build these plants and after Westinghouse agreed to transfer much of the technology behind those plants to the Chinese.
Last year, U.S. authorities also had built a case that another Chinese-owned nuclear company had enlisted former Westinghouse scientists to transfer confidential information about the AP1000 and other nuclear matters.
Global standing
Losing U.S. standing in nuclear technology will have repercussions for the American government beyond its own borders.
Commercial nuclear deals are ties that bind nations to each other for at least half a century, Mr. Murphy said.
If a Russian or Chinese company signs a contract for a new nuclear plant in, say, Saudi Arabia, that means the U.S. has just missed a chance for a powerful diplomatic and trade relationship for the next 80 years, he said.
“Having a vibrant U.S. nuclear industry helps us be relevant internationally,” Mr. Murphy said. “We’re influential because people need us.”
Fifty years ago, he said, the U.S. had broad influence over countries that wanted to build nuclear plants using Westinghouse technology. Back then, Westinghouse was one of the only games in town and the American government would push conditions such as nuclear nonproliferation pacts as part of commercial deals.
That leverage has already weakened significantly as the nuclear industry has added more nuclear suppliers — from Russia, China, South Korea.
“If we just get pushed out of that dialogue, life is going to go on without us,” Mr. Murphy said. That has broad implications for diplomacy and foreign policy.
Bloomberg reported that cabinet officials including Secretary of Energy Rick Perry, Treasury Secretary Steve Mnuchin, Secretary of State Rex Tillerson and Commerce Secretary Wilbur Ross has been involved in discussions about how to keep Westinghouse out of the control of a Chinese entity.
Those discussions have even touched on the possibility of the U.S. government investing directly in the company, similar to what the Obama administration did when it bailed out U.S. automakers.
A federal bailout of Westinghouse may be a trickier sell than it was for the automakers, Mr. Hibbs said. There are fewer jobs at stake, and a large part of its business takes place abroad.
“On the other hand,” Mr. Hibbs said, “the nuclear sector is considered strategic. It has a national security component.”
He pointed to the raging debates in the U.K. over a Chinese company’s minority stake in a project to build the first nuclear reactors in the country in two decades.
Two years ago, Nick Timothy, former chief of staff to Prime Minister Theresa May, said allowing Chinese state-owned companies to buy into nuclear projects would put the U.K. in peril.
“No amount of trade and investment should justify allowing a hostile state easy access to the country’s critical national infrastructure,” he wrote.
That’s just one part of one plant, Mr. Hibbs said. Imagine what a total takeover would elicit.
On Wednesday, Toshiba announced that Engie S.A., a French utility, exercised its right to sell its 40 percent stake in another British nuclear project to Toshiba, which owns the rest.
The option was triggered by Westinghouse filing for bankruptcy and the French utility jumped at the chance to get rid of its involvement in the project, which seeks to bring three AP1000 reactors to West Cumbria. (U.K. regulators gave their final approval for the AP1000 design last week, after a decadelong review process.)
Toshiba is looking to sell the project since it has stated it will no longer build nuclear plants outside of Japan, but finding a buyer with enough money and risk tolerance may be tricky. Korea Electric Power Corp., a South Korean utility, is so far the only company to publicly acknowledge it is entertaining the idea, but it is moving slowly.