Wed, Mar 16, 2011 page10

• Shares of Toshiba hit by nuclear power leak fears

  LITTLE CHOICE: Although the nuclear power provider’s stocks slid in the short term, analysts still give the firm high ratings, as Japan has little choice in its energy needs

  • Reuters, TOKYO
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  Shares in Japan’s nuclear plant makers plunged yesterday as a fresh explosion rocked a quake-hit nuclear plant in Fukushima, north of Tokyo, and radiation leaks darkened prospects for what had once been seen as a growth industry.

  Toshiba, the maker of several of the reactors at the stricken plant, had been touting its ambitions as an exporter of nuclear power technology until the quake and tsunami sparked a nuclear emergency. Officials from the company were at the site offering support, a Toshiba spokesman said.

  Shares in the sprawling conglomerate were untraded amid a glut of sell orders, but bids -indicated a nearly 20 percent plunge to ￥331, following more than 16 percent on Monday. Shares in rival nuclear power makers Hitachi Ltd and Mitsubishi Heavy also fell more than 10 percent.

  “Toshiba said they wanted to put a lot of focus on nuclear power,” said Yuuki Sakurai, CEO of Fukoku Capital Management. “It’s not so much a problem with a particular manufacturer, it’s about the whole issue of safety, but firms that have put a lot of emphasis on nuclear power will suffer corresponding damage.”

  The company’s Web site boasts of its status as Japan’s top supplier of nuclear plants, saying it supplied 17 of the country’s 55 reactors.

  As increased levels of radiation were measured in Tokyo and Japanese Prime Minister Naoto Kan urged people living within 30km of the plant to stay indoors, the industry came under increasing scrutiny around the world.

  On Monday, Germany suspended an agreement to extend the life of its nuclear power stations, Switzerland put on hold some approvals for nuclear power plants.

  Taiwan’s state-run Taipower (台電) said it was studying plans to cut nuclear power output.

  However, several analysts are retaining buy or outperform ratings on Toshiba.

  “The stock move has wiped out the assumed value of the nuclear business completely,” said Damian Thong, analyst at Macquarie Capital Securities in Tokyo, adding that the share price would likely bottom out once the crisis came under control.

  “The value of the nuclear business may fall, but it isn’t going to zero,” he said.

  Bank of America Merrill Lynch said in a research note that nuclear power had been expected to make up 10 percent of Toshiba’s operating profit in the year to March next year, compared with 40 percent for NAND flash memory chips, the remainder made up by social -infrastructure and digital products.

  Analysts and investors said the company was highly unlikely to pull out of the nuclear industry completely.

  “I don’t think that will happen, but they will have to re-think how they deal with safety. Nobody is -going to think it’s acceptable to leave things the way they are,” Sakurai said.

  Public support for nuclear power may weaken in Japan, but analysts say that the resource-poor country, which imports 80 percent of its energy requirements, has few options to meet its needs.

  Asia’s insatiable appetite for electricity is unlikely to derail nuclear programs, but there might be a reassessment of design and safety and more diversification of energy sources.

  “There’s no such thing as a free lunch,” Thong said. “We need electricity. We have to generate it some way. If we don’t have nuclear power, we will have to use fossil fuels and there are consequences to that too.”
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