• Home
  • About
  • Team
  • Contacts
  • Blog

CBI Nuclear Energy

  1. Home
  2. Blog
  3. CBI Nuclear Energy

At first glance, the CBI’s nuclear energy business appears to have generated more problems than it is worth. The problems associated with the construction of the four Westinghouse nuclear energy reactors in the US (two at the Summer Nuclear Station in Jenkinsville S. C., and two at the Vogtle Power Station in Georgia) seem to temporarily have overwhelmed any potential for long term growth in the nuclear energy business.

Building nuclear energy in this country is like trying to reform Social Security. There is a lot of talk, but also lots of political and regulatory difficulties (“nice idea, but not in my back yard”). With the cheap energy now available in this country, thanks to the recovery of oil and gas from shale rock, there seems too little potential for CBI to develop much revenue from nuclear energy in the near future.

While these issues may predominate in this country, the picture in the rest of the world is quite different. Chinese officials have said that they would like to quadruple the nuclear proportion of their country’s generating capacity in the next five years, going from two percent to eight percent by 2020, and following that, more than doubling it yet again to twenty percent by 2030.

China currently has 21 nuclear energy reactors in operation and another 28 under construction, but to reach their 2020 goal they need to start 25 more soon. To reach the 2030 goal they need to start construction of at least an additional 10 reactors per year from 2020 on.

For perspective on the overall potential for growth in the demand for electric power in China, combine the facts that: 1) China’s population is more than four times that of the US, and 2) Per capita electric power in China is less than on third that of the US.

Per capita electric power consumption

Given the upwardly mobile aspirations of the Chinese people, it is easily conceivable that per capita consumption of electric power could double from existing levels. Assuming zero population growth, such a doubling in per capita demand would require more new generating capacity than the all of the existing US electric grid.

Coal fired power plants are the biggest source of carbon emissions in China.

China has a strong incentive to switch to nuclear energy because of their air pollution. Much of air pollution in the country today comes from the coal that is used to generate electric power. Coal is currently their only cheap energy source, but the pollution problem limits its usefulness.

China nuclear energy consumption

China does have a lot of shale rock, but estimates are that it will take 15-20 years to build the infrastructure (pipelines and processing facilities) they would need to tap into this resource. The same restriction will apply to their ability to build generating capacity based on Natural Gas.

AP1000 nuclear energy reactor

Currently there are eight of the Westinghouse AP1000 reactors under construction, four in the US and four in China. CBI is currently involved in the design and construction of all eight of these units. The Westinghouse AP1000 is a third generation nuclear energy reactor and current state of the art. This design is able to deal with the danger of a meltdown by means of a passive shutdown design.

In other words, if any kind natural disaster or accident shuts of electrical power to the station, the reactor will automatically shut itself down without the necessity of human intervention or back up power, and therefore avoiding the contamination problems confronted at the Fukushima Daiichi nuclear energy station in Japan.

http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2014/08/13/video_3a00_-westinghouse-animation-explains-passive-cooling-in-the-ap1000-reactor-081302.aspx

The construction of The AP1000 nuclear energy reactors involves lots of off- site fabrication of very large pieces by different fabricators. Many of these parts are so large that they have to be shipped to the construction site on specially designed rail cars or trucks. The modular assembly approach is a little like building a Boeing 787, so it is not unreasonable to expect that there would be problems with the first units assembled.

Because of the pre-fabricated nature of the design, it is reasonable to assume that it will be a lot cheaper (and more profitable) to build the 10th unit than the first ones. Thus, it seems likely that full potential from this type of construction lies well down the road.

http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2015/07/08/vogtle-units-3-and-4-construction-video-update.aspx

CBI has indicated that they will not get involved with new nuclear projects until they have settled the problems in South Carolina and Georgia. This makes sense because of the negative impact of the current projects on the company’s stock (hot money is not concerned with things like long term competitive advantage), and because CBI is currently in negotiations with all the other parties to the existing contracts to determine who will pay for what.

Down the road

China is currently negotiating with Westinghouse for 12 more reactors to begin construction in the “near future”. Westinghouse’s CEO Danny Roderick has estimated that China could build as many as 200 additional reactors in the next 15 years.

Last year, CBI signed an agreement with China National Nuclear Corp (CNNC) to collaborate on nuclear energy plant development in China. “Areas of cooperation include operation and maintenance support for CNNC’s operating nuclear plants in China: engineering, procurement and construction management of the Westinghouse AP1000 reactors owned and planned by CNNC; international nuclear power market development: and nuclear power training programs and management personnel exchange in U.S. and China.”

In 2013, CBI signed a similar agreement with CPI Power Engineering Co. Limited., a subsidiary of China Power Investment Corp. So, CBI now has EPC agreements with two of the three biggest electric power companies in China. There were no dollar figures or specific contracts listed in these announcements, so it is hard to estimate the impact on CBI’s future revenue. We are just going to have to watch this space.

Part of the deal that Westinghouse negotiated with China to build its first four reactors was an agreement to license the technology on which the reactor is based to China. As a result, China now has their own design (ACP1000 nuclear energy reactor) which is already under construction in China, and which they intend to market internationally. If history tells us anything, we can expect that China will try to do as much of the nuclear construction as they can by themselves, but at the build rates indicated above, they are going to need help.

http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2014/03/12/five-years-in-one-minute_3a00_-time_2d00_lapse-video-documents-construction-of-world_2700_s-first-ap1000-reactor-031202.aspx

Nor is China the only country that expects nuclear development. Westinghouse is currently negotiating with Kazakhstan, Turkey, and South Africa among others to build AP1000 nuclear energy reactors. One of the Chinese AP1000 projects is projected to go on the grid early next year with the rest later in 2016 or early 2017. It will be interesting to see how much of this business CBI will take on.

08/25/2015



Leave a Reply Cancel Reply

Your email address will not be published.


Comment


Name

Email

Url


Blog Archive

2020

  • The Stock Market

2019

  • Behavioral Investing

2018

  • Trumped
  • Warren Buffett vs Wall Street
  • Globalism, 1982-2000 Bull Market

2017

  • Volatility Underlying Calm Market
  • What’s new with CB&I?
  • Passive Investing
  • Economic Cycles
  • Current Stock Market 2017 Comment

2016

  • Global Plastics Summit Highlights
  • Value Investing vs Index Investing
  • How to Play an Index Bubble
  • Successful Investors
  • Is the Market Overvalued?
  • Operating Earnings
  • Article by investment manager in Bay Hill Living
  • Building Foundation

2015

  • 3G Culture – Dream Big
  • Myopic Loss Aversion
  • CBI Nuclear Energy
  • St Joe Company
  • What’s in a Word? Plastics.
  • Are Bonds Safer Than Stocks?

2014

  • Chicago Bridge and Iron
  • CAMEX 2014
  • Global Economy October 2014
  • Fluor Corporation
  • Interesting Quotes from Daily Journal Annual Meeting
  • The Daily Journal Annual Meeting
  • Albemarle Corporation
  • Triumph Group
  • The American Energy Revolution
  • Singapore

2013

  • St Joe Company Update
  • Hedge Fund Managers
  • Triumph Group Inc.
  • Bitter Brew
  • An Antifragile Portfolio

2012

  • Leucadia National Corporation
  • This Time it is Different
  • Successful traders psychology
  • St Joe Company
  • Learning from Pain

2011

  • Long Cycles – Part II
  • Long Cycle
  • Nasty Month for Market
  • Make a Buck with Fortescue Metals Group
  • Berkshire Hathaway Look Through Earnings
  • St Joe Company Inc
  • Successful Investment Management
  • A Look Into Latin American Market
  • The Mother of all Quarters
  • 2010 Investment year results

2010

  • Fault Lines
  • US Market 2010
  • Berkshire Hathaway Third Quarter 2010
  • The Stock Market 2010
  • Berkshire Hathaway Second Quarter 2010
  • Berkshire Hathaway Performance
  • Long Term Greedy
  • Goldman Sachs
  • Berkadia and Leucadia
  • USG corporation
  • Berkshire Hathaway 2009 2010
  • Why Capitalism Works

2009

  • The Lords of Finance
  • The $44 Billion Dollar Train Set
  • Berkshire Hathaway 3rd Quarter 2009
  • Career Risk for Investment Manager
  • Berkshire Hathaway financial statements
  • Berkshire Hathaway Preferred Stock
  • Moral Hazard
  • Credit Default Swap
  • The Shadow Banking System
  • Learning Things the Hard Way
  • Our C-System
  • 2008 Investment results

2008

  • Investment Risk
  • Bear Markets
  • Generational Events
  • Orange sheets – Money is doing better
  • Inflation Not The Problem
  • Tipping Point
  • Long Term Capital Management
  • Financial Insurance
  • Western Refining Inc
  • Berkshire Hathaway Year To Date
  • Berkshire Hathaway Cash Flow
  • 2007 investment results

2007

  • Investment results 4th Quarter 2007
  • Greenspan on Inflation
  • Berkshire Hathaway Third Quarter 2007
  • Berkshire Hathaway Operating income 2007
  • Berkshire Hathaway Hedge Fund
  • Leveraged Buyouts
  • Stability Unstable
  • Weak Dollar
  • Berkshire Hathaway Chairman’s Letter
  • Steel Dynamics
  • Breakwater Resources
  • 2006 Investment year results

2006

  • New Investment Stocks
  • Equitas
  • Berkshire Hathaway Third Quarter 2006
  • Hurricane Synergy
  • Berkshire Hathaway Second Quarter 2006
  • Fat Pitch
  • Perfectly Obvious
  • Berkshire Hathaway Growth Rate
  • Berkshire Hathaway First Quarter 2006
  • Berkshire Hathaway Annual Report 2006
  • Inflation Is
  • 2005 Investment year results

2005

  • Exogenous Events
  • The Easy Money
  • Look-Through Earnings
  • High-Risk Mortgages
  • Unintended Consequences
  • Rydex Ursa Fund
  • Warren Buffett Premium
  • Private Equity
  • Latticework Mental Models
  • Buffett’s Lackluster Performance
  • 2004 Investment year results
  • Professor Smith’s Second Bubble

2004

  • Hedging Currency Disaster
  • Risk Assessment
  • Too Many Bears
  • The Chinese Century?
  • Patterned Irrationality
  • Timber
  • Costco’s Cash
  • Physics Envy by Charlie Munger
  • Asset Allocation Berkshire Hathaway
  • The Balance of Payments
  • 2003 Investment year results

2003

  • Hedge Funds
  • The trade deficit is not debt
  • Secular Bear Market
  • Which Index Funds?
  • A Different Drummer
  • Costco’s Float
  • The Power of Float
  • Berkshire Hathaway Annual Meeting 2003
  • Psychology of Human Misjudgment
  • Sitting on the Sidelines
  • Berkshire Hathaway intrinsic value
  • 2002 Investment year results

2002

  • Insurance company Moats
  • Bond Bubble
  • Berkshire Hathaway Cash Flow 2002
  • Behavioral Economics
  • The Bear Market 2002
  • Greenspan Put
  • Second Quarter Cash Flow at Berkshire Hathaway
  • Berkshire Hathaway Annual Meeting 2002
  • Red Wire – Green Wire
  • Stupid FED Tricks
  • The Bottom Line
  • 2001 Investment year results

2001

  • Don’t Fight the FED
  • Buy and Hold? – It all Depends
  • Ben Laden and Berkshire Hathaway
  • The Dinosaurs Dance
  • Costco Moat
  • Bubble Watching
  • Sit on your Ass investing
  • Berkshire Hathaway Annual Meeting 2001
  • Carnival Cruise Lines
  • 450000 Square Ft Furniture Store
  • Lunch Money Indicators – Annual report
  • Other People’s Money

2000

  • Bear Tracks
  • Build It and Money Will Come
  • Efficient Stock Market
  • Style Drift
  • Lunch Money Indicators – Options
  • Identifying Problems
  • Small Retail Stocks
  • Charlie Munger comments
  • Big Al and the Bubble Machine
  • Berkshire Hathaway Cheap
  • Index Funds
  • 16 rules for investment success
Make an appointment or contact us by phone: +1 (689) 246 49 49
© 1999 - 2022 Losch Management Company
Support by Global AGM