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.