What is the Future of Westinghouse Now that Brookfield Wants to Sell It?

What is the Future of Westinghouse Now that Brookfield Wants to Sell It?

• What is the Future of Westinghouse Now that Brookfield Wants to Sell It?
• No Fueling Around – Senate Gets Serious about HALEU
• NuScale Power Reaffirms Financial Outlook and Provides Business Update

What is the Future of Westinghouse Now that Brookfield Wants to Sell It?

For the past three years Westinghouse has been informing the nuclear energy industry of its plans to design and offer for sale a 1-5 MWe microreactor which is calls the ‘eVinci’.  According to the company’s website, the eVinci micro-reactor design is transportable, designed for government usage allows for mobile operations utilizing standard military transportation vehicles and containers.

The nature of the design will allow the reactor to be rapidly transported to sites as needed to create an abundant and resilient power supply to support advanced defense systems. The firm also plans to offer it for sale for micro-grid applications and stand alone power sources for industry and other commercial applications.

What is the Future of Westinghouse as Brookfield is Offering it for Sale?

In order to put these plans in perspective, it is important to look at the overall future of Westinghouse as a nuclear reactor vendor. As reported by the Pittsburgh Post Gazette, Brookfield Business Partners is seeking to sell all of its interest Westinghouse Electric Company just four years after buying it out of bankruptcy according to a May 10th report.  (Brookfield profile) (institutional shareholders)

This is the second time Brookfield has put Westinghouse on the market. Brookfield told the newspaper they didn’t get enough investor interest to sell last year. Brookfield says now that the now there is an energy crisis in Europe, due to Russia’s unprovoked invasion of Ukraine, there is revived interest in nuclear energy. According to public filings cited by the newspaper, Brookfield Business Partners lists its investment in Westinghouse at $405 million.

Readers of this blog may have noticed a significant increase in the number of press releases from Westinghouse about its nuclear reactor business. This is entirely logical as the firm is on the auction block. The firm’s executives want to do everything in their power to make the company look good to a potential buyer and to get a fair price as a result.

Brookfield has done well with Westinghouse. and the firm wants to cash out on the value of Westinghouse’s cash cow businesses of nuclear fuel fabrication and reactor services., According to its CEO the firm sees new opportunities with greater potential for returns on investment.

Brookfield Business Partners CEO Cyrus Madon told the Post-Gazette newspaper, “Look, we’ve made many times our investment in Westinghouse. We’ve already pulled out more than our invested capital just through regular dividends. And I would say our job is sort of done here.”

Questions for Westinghouse

A few weeks ago this blog submitted a list of questions to Westinghouse about its plans for the eVinci micro-reactor, and its reactor business in general, and how they might be affected by being acquired by a new equity fund or other institutional investor.  The firm isn’t the only fish in the pond that is seeking customers at the low end of power ratings and for full size reactors.  It’s a competitive environment in either market.

The market for full size reactors in heating up especially in the UK where PM Boris Johnson has pledged to build eight new reactors in the next two decades. Poland is a particularly hot focus for nuclear new builds with vendors from France, the UK, and the U.S. positioning themselves for a tender expected to be released this year. Poland is also a market where interest in small modular reactors by private industry has seen a lot of activity.

So with all this “action” in the mix, one would think that the one thing that Westinghouse would really want to do, and be focused on, is to be clear in its press relations with a consistent narrative about its plans and overall business objectives. For Westinghouse to succeed in achieving its global ambitions to participate in the nuclear reactor new build of nations wanting to decarbonize their economies, it needs to tell its story beyond the bare bones of press releases.

According to a Westinghouse spokesperson this week, the firm declined to respond to these questions (below) saying company executives are too busy with all of their new initiatives to answer press inquiries at this time.

While it is understandable that Westinghouse is cautious about giving away its business strategy to the competition by talking ahead of its own headlights to the press, these are reasonable questions that would be asked of any reactor vendor, by investors, especially considering how many opportunities it has to once again become a leading global vendor of nuclear reactor technologies. In point of fact, these are also the types of questions Wall Street analysts are likely to ask.

This is a message for the nuclear industry in general.  Bottom line, it is never to early to get your story out there on news wires. When there is a news vacuum, the risk is that something other than the firm’s fact-based narrative will come along to fill it.

For example, just recently, streaming media service Netflix recently aired a docu-drama about Three Mile Island. The film’s producer interviewed one nuclear industry subject matter expert extensively, but used only a few minutes of his comments. The American Nuclear Society published a rebuttal to the film’s misinformation on its website calling it “drama disguised as documentary.”

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So, here for the rhetorical record, are the questions, along with a few clarifications, that hopefully, at some future time, the firm will respond to with answers.

War in Ukraine?

Once the war in Ukraine is settled, and the threats of Russian attacks on Ukraine’s nuclear plants are over, how will construction of four new reactors, and one rebuild of a VVER, for Energoatom be financed?  Last week Westinghouse and Energoatom said they’ve expanded their plans to build as many as nine 1150 MWe AP1000s. Assuming the funds are found for these projects, what is the timetable by site in Ukraine for new construction?

Ukraine is borrowing $51 million to buy nuclear fuel for its fleet of Russian built VVER reactors.  Energoatom operates four nuclear plants in Ukraine, with a total of 15 units, although the six-unit Zaporizhyzhia plant, operated by its Ukrainian staff, is currently under Russian military control. The Russians have more or less retreated from trying to conquer the entire country and are focusing their unprovoked invasion of the country on Ukraine’s eastern provinces. This development, if it holds, may make the rest of the nuclear fleet more or less safe from Russian attacks.

Whether Ukraine’s forces can liberate the Zaporizhyzhia plant, with its six large VVERs, is unknown, but it could be a significant addition to the demand for nuclear fuel from Westinghouse if that happened. It is unclear whether the Russians plans to refuel any of the reactors themselves. What is Westinghouse’s overall risk assessment of supply fuel to Ukraine’s reactors?

For the new build, how much material /components can be salvaged from the V C Summer project for reactors in Ukraine? Energoatom, Ukraine’s nuclear utility, paid a visit to the South Carolina site in 2021 to do some shopping for the left over parts that might be available for a new AP1000.

eVinci and the NRC?

Relative to the eVinci micro reactor, when does Westinghouse plan to submit it to the NRC for safety design review? The firm filed a “regulatory engagement plan” in December 2021. What progress has been made towards a license application submittal? Given the unique nature of the eVinci reactor, what challenges does the firm see that will need to be addressed in the NRC application review process? Separately, what work has Westinghouse done to develop the supply chain for the eVinci reactor?

Work Scope for Canadian Government Grant of  CAD27 Million?

What is the work scope and schedule for major deliverables for the CAD27 million in funding in Canada? What does Canada’s government expect, in term of progress milestones and deliverables, as a result of providing the funding to the firm? Will any of the funds be used to support preparing documentation for the Canadian Nuclear Safety Commission? Can the firm provide more details on Westinghouse recently signed agreements with Canada’s Saskatchewan Research Council (SRC)? Are any other provinces interested in the eVinci micro-reactor?

There are more than a dozen small modular and micro reactor developers which have submitted their applications for Phase 1 of the Canadian Nuclear Safety Commission’s (CNSC) Vendor Design Review (VDR), and several of them have “graduated” to Phase 2. CNSC’s VDR process is like training wheels on a bicycle. It helps firms get their data and analyses in order to address CNSC’s regulatory requirements and to be ready to submit an application for a license to build their designs in Canada.

In response to an inquiry sent to CNSC asking about the status of the eVinci VDR effort, the agency said via an authorized spokesperson that there has not been any change since it was submitted in February 2018 asking for a combined Phase 1 & 2 process although there could be developments in the future. CNSC did not have a timetable for them.

Future of DOD Applications?

The eVinci microreactor was not selected last September for round two of Project Pele which is a plan to deploy micro reactors at military sites worldwide. The first of a kind (FOAK) unit will be built by BWXT for $300 million at the Idaho National Laboratory by 2024. It will use TRISO fuel enriched to between 5% and 19% U235.  Absent the DOD contract, what are the prospects for the eVinci design going forward for other DOD or related commercial applications?

Expectations for New Reactor Business in the U.K.?

What are Westinghouse’s prospects for building new reactors in the UK given that the AP1000 design is already approved by the ONR GDA process?  Will the new UK emphasis on nuclear energy create new opportunities for Westinghouse to build AP1000s, e.g., re-visit Moorside or replace China at Bradwell or Wylfa & Oldbury?

Expectations for New Reactor Business in Poland?

What are Westinghouse’s prospects for building AP1000s in Poland? How much support is the firm getting from the U.S. government to pursue this opportunity and how much support will it need in the future to close the deal and to finance and build the six to nine reactors that Poland wants to replace its coal-fired power plants?

Expectations for New Reactor Business with South Korea?

This week State utility Korea Electric Power Corporation (Kepco) agreed with Westinghouse to explore ways to cooperate on international nuclear power generation markets, with South Korea saying it plans to export 10 nuclear power plants by 2030. Last week, Westinghouse signed a strategic cooperation agreement with Hyundai Engineering and Construction to jointly participate in global AP1000 plant opportunities. Kepco, its subsidiary Korea Hydro & Nuclear Power (KHNP), which operates the country’s nuclear fleet, and Westinghouse aim to set up a joint working group to draw up detailed plans. Ten new reactors for export is an ambitious goal. What countries are publicly listed prospects for these deals?

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No Fueling Around – Senate Gets Serious about HALEU

America’s nuclear power plants depend on enriched uranium fuel, but we still depend heavily on Russia for nuclear fuel and fuel services. This dependence is more acute for high-assay low-enriched uranium (HALEU), which is used in fuel for advanced reactors now under development in the US.

The latest blog post from Third Way experts Alan Ahn and Ryan Norman examines two nuclear bills in the Senate aimed at addressing the gaps in America’s nuclear fuel cycle and provides a useful side-by-side comparison of the proposed legislation.

“Enriched uranium fuels are the lifeblood of our nuclear reactors,” write Ahn and Norman. “Russia is a major global provider of LEU fuel services and is currently the only commercial supplier of HALEU in the world. Thus, the need to secure uranium fuel supply and ensure long-term availability is even more urgent in the wake of Russia’s invasion of Ukraine. Without a reliable supply of nuclear fuel, we risk our energy security, technological leadership, and climate goals, among other national priorities.”

The post provides a detailed comparison of the two bills recently introduced in the Senate:

• The International Nuclear Energy Act of 2022, introduced by Senators Joe Manchin (D-WV) and James Risch (R-ID), is a broad bill designed to promote international use of US civil nuclear technology and counter global reliance on Russia and China.

• The Fueling Our Nuclear Future Act, introduced by Senator John Barrasso (R-WY), specifically targets the establishment of domestic HALEU enrichment capability and the availability of HALEU for the upcoming Advanced Reactor Demonstration Program (ARDP) demonstrations.

“Ultimately, a comprehensive solution that includes efforts to produce HALEU from existing fuels, develop domestic HALEU enrichment capability, and enable the foundations of an assured fuel supply for US advanced reactors is urgently needed,” Ahn and Norman conclude.

Read the full article Fueling American Reactors: A Tale of Two Nuclear Bills

NuScale Power Reaffirms Financial Outlook and Provides Business Update

• Reports $383.7 million of total capital available to fund strategic growth plan, including upsized $341 million raised through successful merger with Spring Valley Acquisition Corporation
• Maintains significant commercial momentum year-to-date with three new active engagements in the United States and Europe, expanded coalition of strategic partners and investors in the U.S., South Korea and Japan, and reached key technological and licensing milestones
• Now a publicly-listed company under ticker symbol SMR on the New York Stock Exchange

Business Updates

 Deal Flow –  Grew customer pipeline to four active relationships around the world. These customers include NuScale Power’s anchor relationship with Utah Associated Municipal Power Systems (UAMPS) and newer agreements with Dairyland Power Cooperative in the U.S., S.N. Nuclearelectrica S.A. in Romania and KGHM in Poland.

UAMPS in Idaho – Made substantial progress with its anchor client UAMPS towards deployment in 2029. The Company recently completed its field investigation activities at the project site located within the Idaho National Laboratory near Idaho Falls, Idaho. In parallel, NuScale Power continued to develop a Combined License Application (COLA) and is currently analyzing data collected from the comprehensive site investigation and a two-year monitoring process, which will be presented in the COLA to address key safety and environmental considerations. The COLA will also provide additional project-specific facility design information, which will support the Nuclear Regulatory Commission’s (“NRC”) safety and environmental reviews, as well as public consultations.

Strategic Partnerships – Formed new strategic partnerships. NuScale Power partnered with steel manufacturer Nucor in the U.S. and with the Japan Bank for International Cooperation (“JBIC”) in Japan, as well as strengthened a partnership with Doosan Enerbility in Korea. All of these partnerships are emblematic of the growing importance of nuclear energy in these regions and around the world, and will play key roles in driving the commercialization of NuScale Power’s SMR.

Supply Chain Update – Made significant progress on commercialization process including technology and production process development. The Company is ordering long lead-time equipment now, which it believes is a significant competitive advantage. NuScale Power is simultaneously working with its commercial and supply partners on various testing and validation campaigns, while priming the production process through initiatives such as FXM-19 forging trials with both domestic and international forging sources.

NRC Update – Reached additional licensing milestones with the NRC in addition to its COLA associated with the UAMPS project. This includes the recent approval of the Building Design & Analysis Licensing Topical Report and the acceptance of three other topical reports for review, including the Rod Ejection Accident Methodology Licensing Topical Report Revision, the Framatome Fuel Applicability Topical report supplement and the Critical Heat Flux Topical report supplement.

Financial Update and Outlook

Total available capital remains strong at $383.7 million. This includes $42.7 million in cash or cash equivalents as of March 31, 2022 and $341 million from the assets in trust and upsized PIPE, net of transaction expenses, raised in connection with the recently closed combination with Spring Valley Acquisition Corp. (“Spring Valley”).

Revenue of $2.4 million and net loss of $(23.4) million for the three month period ended March 31, 2022, compared to revenue of $0.7 million and a net loss of $(22.7) million, respectively, for the same period in 2021.

Research and development expenses of $24.4 million for the three month period ended March 31, 2022, compared to $18.8 million for the same period in 2021.

NuScale Power reaffirms financial outlook including $16 million cash revenue for full year 2022 as first shared in its merger announcement with Spring Valley.

Sufficient capital to support longer-term business development plans, thanks in part to a $54 million increase in PIPE proceeds from $181 million to $235 million. Actual merger proceeds of $341 million exceeded the $200 million cash need forecasted through 2024 in the projections shared in its merger announcement with Spring Valley

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