Friday, August 09, 2013

Interesting Nuclear Trio

There is one more facet to the involvement of Chicago Bridge and Iron (CBI:  NYSE) in the nuclear power industry.  In the last two posts we looked at CBI’s entrance into nuclear with the acquisition of The Shaw Group and its relationship with Toshiba.  The Shaw Group is contracted to building two nuclear power units at the South Texas Project using Toshiba’s Advanced Boiling Water Reactor (ABWR) design.

The Shaw Group’s interests in the nuclear industry have not been limited to its cooperative agreement with Toshiba.  In 2007, Shaw Group joined a consortium led by Toshiba to acquire the nuclear powerhouse Westinghouse Electric Company.  Over half of the commercial nuclear power plants in the world involve Westinghouse designs.  Shaw’s 20% stake in Westinghouse carried an option to put to Toshiba.  With the buyout of Shaw Group by Chicago Bridge and Iron looming, the option was finally exercised.  Toshiba paid $1.6 billion to The Shaw Group, bringing the Toshiba ownership in Westinghouse to about 87%.  The Shaw Group used the proceeds from its Westinghouse sale to pay down debt before closing its deal with CBI.

Westinghouse specializes in the pressurized water reactor  -  the kind that heat water but not to a boiling point and then use heat exchange to create steam.  Westinghouse designs are under construction in Korea and China, two countries where nuclear power plans have been moving forward with little interruption.

Ownership in Westinghouse had put The Shaw Group in-line for engineering, procurement and construction contracts in the China market.  It would seem that the CBI affiliation and the business it could generate with Shaw Group as part of its portfolio, probably makes up for any nuclear power contract in China that might be given up to Toshiba and its other partners.  For now it seems The Shaw Group and its new best friend in Chicago Bridge and Iron are content with the Toshiba joint agreement.  As close as The Shaw Group and Toshiba have been it would not be surprising to see another tie up of some sort in the future when CBI has finished digesting The Shaw Group acquisition.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  CBI is included in the Nuclear Group of The Atomics Index.


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