Hitachi Ltd. said Thursday it has suspended a 3 trillion yen ($27.5 billion) nuclear plant project in Britain and may abandon it completely unless a new financing scheme is introduced, in a serious blow to the growth strategy of Prime Minister Shinzo Abe's government.
Hitachi will book a special loss of 300 billion yen in the year ending in March on the decision to freeze a plan to build two nuclear reactors in Anglesey in Wales, the company said.
The British government and local financial institutions agreed to provide 2 trillion yen in loans but Hitachi has failed to find investors to finance the rest of the project cost which was initially estimated at 2 trillion yen.
"We've reached limits in further investing (in the project) as a private entity," Hitachi President and CEO Toshiaki Higashihara said at a press conference.
The decision is the latest setback for Abe who has been pushing infrastructure exports as part of his "Abenomics" growth strategy. Exporting nuclear technology is a pillar of the policy amid dimming prospects for new reactors in Japan in the wake of the Fukushima nuclear crisis in 2011.
The British nuclear plant was the only remaining major overseas project on the horizon for Japan after other plans in countries such as Vietnam and Lithuania involving Japanese companies were scrapped or halted.
The nuclear power industry is facing a tough environment as costs to construct reactors have been on the rise due to stricter safety requirements after the Fukushima nuclear disaster, while costs of power generation through renewable energy have been falling.
Toshiba Corp. decided in 2017 to exit the nuclear power business outside Japan after incurring huge losses in the United States, while Mitsubishi Heavy Industries Ltd. is considering withdrawing from a nuclear project in Turkey amid ballooning safety-related costs, according to company sources.
Higashihara did not rule out the possibility of restarting the British project but that depends on negotiations with the British government on more financial assistance, he said. Even if the project is resumed, it would require considerable cost and time as a broad review would be necessary, the CEO said.
"We have no plan for accelerating exports of our nuclear technologies overseas at the moment," he said.
The British project was part of the company's strategy to expand its nuclear business overseas but Hitachi will focus on the domestic market for the time being, the top executive said.
The company lowered its net profit outlook for the current fiscal year to 100 billion yen from its previous forecast of 400 billion yen due to the extraordinary loss.
Higashihara said the suspension has nothing to do with the political turmoil surrounding the Britain's exit from the European Union.
Hitachi had been looking for investors from Japanese and British private and public sectors in its wholly owned unit, Horizon Nuclear Power Ltd., which oversees the project.
By reducing its stake in Horizon, Hitachi hoped to lessen the impact of the nuclear project on its entire group. It acquired Horizon in 2012 for 697 million pounds ($898 million).
Higashihara said he intends to keep staff at Horizon "at minimum" and is mulling selling it in the future.
In December, Hitachi Chairman Hiroaki Nakanishi said the company told the British government it "can't go any further" with the current construction plan.
Hitachi and the British government had aimed to start construction of the advanced boiling water reactors in 2019 and to begin operations by 2025.