Toshiba (TOSYY)  learned a very hard lesson: Laptops, televisions, and memory and processing chips do not mix with nuclear power plants.

The Japanese company plans to stop building nuclear power plants, according to an article Tuesday in The Wall Street Journal, which cited an anonymous Toshiba executive. 

It's a very sad story for the company's shareholders, but it doesn't mean there aren't great investment opportunities in nuclear power. 

Toshiba bought Westinghouse Electric (which is a separate company from Westinghouse Electronics, the TV manufacturer) back in 2006, hoping there were opportunities in nuclear plant construction using Westinghouse Electric's advanced plant design. known as the AP1000. Moreover, Westinghouse Electric had a collection of contracts underway including two major plant projects with Southern in Georgia and Scana in South Carolina.

But there were problems in these projects that even today are still not entirely clear. Toshiba was working with numerous contractors on the still unproven AP1000 technology including Chicago Bridge & Iron. The projects have resulted in legal disputes among the companies involved.  

Toshiba said late last year said it expected to take writedowns related to the nuclear business that could wipe out the company's expected profits. Although it's getting out of building nuclear power plants, Westinghouse Electric will continue to design plants, although given the company's problems, it's unclear whether it will have any customers for its designs. In order to cover the costs related to the Westinghouse Electric mess, Toshiba also said recently it was planning to sell part of its memory chip unit. Not good.

It will be interesting to see what will be left of the company when the dust settles. 

But there are stellar growth opportunities for investors in nuclear power, if you know where to look.

In 2015, 31% of South Korea's electricity generation came from nuclear power. The country has 25 nuclear reactors and plans to increase its nuclear capacity by 70% by 2029, according to the World Nuclear Association. 

Meanwhile, China has 36 operating reactors and 21 under construction, according to the World Nuclear Association. The country plans to start construction on even more. The nation is expected to double its nuclear capacity by 2020-21, the association says. BMI research recently said that China will overtake the U.S. in nuclear power capacity by 2026.

What South Korea and China have in common are two things that the U.S. and Europe should notice.

First, they use a focused group of contractors and continue with the same team on a rinse-and-repeat basis.

Second, they embrace the notion that small is big. Rather than sticking with massive power plants, South Korea and China have been deploying small modular reactors. These are small-scale reactors that can be built in factories and delivered and set up as needed.

The leaders in China are two state-owned enterprises: China General Nuclear Power and China National Nuclear. The companies have stocks listed in China but not in the U.S.

For U.S. investors, the company to look at is South Korea's Kepco (KEP) - Get Report . It's the primary power utility in South Korea and a nuclear engineering and construction company. Not only is the company very good at projects inside its home market, but it has been ramping up its foreign nuclear projects. It has been involved in the construction of a nuclear power plant in the United Arab Emirates and last year won the contract to operate that plant for 60 years once it opens.

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Bottom line, nuclear power plants are complex and best built by focused contractors with an eye towards smaller modular plants. That's where the long-term profits can be found.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.