THE NUCLEAR REACTOR INDUSTRY: INTERNATIONAL SHAKEOUT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00558R000100030002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: July 19, 2011
• Sequence Number: 2
• Publication Date: January 1, 1983
• Content Type: REPORT

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Directorate of
Intelligence
Shakeout
The Nuclear Reactor
Industry: International
GI 83-10005
January / 983
copy 3 6 6
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Directorate of
Shakeout
The Nuclear Reactor
Industry: International
Energy Issues Branch,
welcome and may be addressed to the Chief,
This paper was prepared b
Office of Global Issues. Comments and queries are
Secret
GI 83-10005
January 1983
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The Nuclear Reactor
Industry: International
Shakeout
Key Judgments Escalating construction costs, high financing charges, and slow growth in
Information available electricity demand are causing many countries to cut back on their
as of /December /982 domestic nuclear power programs. Because of these cutbacks, nuclear
was used in this report.
reactor vendors are being forced to compete more aggrf;ssively for sales in
the international market. The same factors that have plagued domestic
reactor sales also trouble the export market and are cornpounded by the
growing financial difficulties of many potential purchasers. During the
next three to four years, no more than eight to 10 reactors are expected to
be sold on the international market. China, South Korea, and Taiwan are
the most likely purchasers.
If both domestic nuclear power programs and the export market remain
weak as we now expect, US firms will have difficulty garnering additional
orders for new reactors for the balance of the decade. Tl-e French firm Fra-
matome, with a relatively strong domestic nuclear program and subsidized
financing for nuclear reactor exports, will remain the n'~ost aggressive US
competitor for reactor sales on the international market. The West German
and Canadian nuclear industries will remain tough corr~petitors, but they
will phase back on their production capability.
Without a major turnaround in prospects for nuclear power reactor sales,
we believe at least three nuclear reactor vendors will stop production.
Given the support foreign governments give their dome;~tic nuclear indus-
try, we believe that two of the three reactor vendors stopping production
will be US firms. The physical capacity to build nuclear reactors will not
be diminished unless manufacturers opt to dismantle their surplus produc-
tion capacity. While waiting for nuclear reactor orders to rebound in the
early or late 1980s, most vendors will retrench and concentrate their
business in the burgeoning nuclear service industry. As a result they would
begin to lose the technicians and managers able to design and construct nu-
clear power plants
Secret
G/ 83-10005
January 1983
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Although this shakeout should pose no significant difficulties in the next
several years, it could leave the industry with insufficient trained manpow-
er to meet a sharp resurgence in orders for nuclear power reactors in the
1990s. We do not expect US defense programs, such as the nuclear
weapons program, to be significantly affected by this shakeout, but the US
Navy will be affected. The US nuclear industry's manufacturing capability
is contracting. The loss of suppliers will reduce competition and will result
in greatly increased costs for sole-source specialty items. The Navy expects
no major problem with its primary nuclear suppliers, but expects some
problems at the subcontractor and secondary supplier level.
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Domestic Programs Cut Back
1 __
Major Export Potential for US Firms
4 _
Mexico
4 __
South Korea
4 __
Taiwan
5
China
5
Yugoslavia
6 _ _ _
Other Potential Sales
6 __
Industry Shakeout Ahead
~ ___
Implications for US Vendors
8 _
Industry Outlook
9
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The Nuclear Reactor
Industry: International
Shakeout
Introduction
The nuclear reactor manufacturing industry is in a
deep slump. Sluggish domestic reactor sales have
increased the importance of the international market.
Worldwide nuclear reactor exports have declined
considerably from their peak in the early 1970s.
According to industry reports, only 16 nuclear reac-
tors have been sold on the international market during
the past five years, down from an average of 13 per
year in the first half of the 1970s. We expect the
export market to remain at its depressed level for at
least the next several years. At best, we expect only
eight to 10 nuclear reactor export sales in the next
three or four years.
Domestic Programs Cut Back
Six countries currently manufacture nuclear reactors
for export: Canada, France, Sweden, West Germany,
the USSR, and the United States. Almost across the
board, domestic nuclear power programs in these
countries are being cut back. Industry analysts report
that high capital costs, high interest rates, regulatory
uncertainties, and less than adequate return on equity
have forced utilities to delay or cancel nuclear power
reactor construction programs. Lower growth rates
for electricity demand have reduced utility require-
ments for new electric generating capacity of any
kind.
Figure 1
Worldwide Nuclear Reactor Exports
government regulators to stimulate the use of nuclear-
generated electricity through new rate structures of-
fering reduced rates for residential electric space
heating and for industrial custorr-ers within 30 kilo-
Some countries are faring better than others. Despite
recent cutbacks, the French nuclear power program is
large and continues to grow. Framatome, the French
nuclear reactor vendor, is the sole reactor supplier for
the French nuclear program. Strong government sup-
port for the program crystalized as a result of the
1973 oil crisis and subsequent efforts to reduce the
strategic vulnerability stemming from dependence on
unstable foreign oil suppliers. The French Govern-
ment has made nuclear-generated electricity a corner-
stone of its program to improve the security of energy
supply. Electricite de France has been encouraged by
meters of a nuclear plant.
According to recent press reports,, Paris now plans to
cut back on construction of new :nuclear power plants
beginning in 1984. Recent French projections had
forecasted a continuation of the 6-percent-per-year
growth rate for electricity demand. Analysis indicated
that this growth rate would require Electricite de
France to order about three reactors per year. Over
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Figure 2
Nuclear Reactor Exporters and Potential Importers
ao~~da,,,PP,ese~~a~,o~ s
~o~ ~e~ease~,~, a~~no~,~a~~~e
the past three years, however, Electricite de France
reports that electricity demand has stagnated and the
only growth in electricity consumption was because of
the startup of the final stages of the Eurodif Gaseous
Diffusion Plant. As a result, Electricite de France is
planning to reduce its order rate for nuclear reactors
by as much as 50 percent.
To counter the effect of these cutbacks on the nuclear
industry, Paris probably will compete vigorously for
sales in the international nuclear reactor market.
France already offers preferential financing and less
restrictive safeguards to improve its export sales
prospects. During the past year or so, France seemed
to be losing its enthusiasm for subsidized financing.
We believe, however, that, because of the expected
cutback in the French domestic nuclear power pro-
gram, Paris will continue offering subsidized financ-
ing for nuclear reactor exports, although possibly at
A referendum in 1980 limited Sweden's domestic
nuclear power program to 12 nuclear power plants
totaling 9,500 megawatts. All of these plants are in
operation or under construction; thus, ASEA-Atom,
the Swedish nuclear reactor vendor, must depend on
export sales to survive as a vendor of nuclear power
plants.
reduced levels.
According to the Canadian Government, domestic
requirements for nuclear generating capacity should
be sufficient to sustain the Canadian nuclear industry
in the long term. Near-term orders for Canadian
reactors have slowed, according to industry reports,
and Atomic Energy of Canada, Ltd., (AECL) is
experiencing commercial difficulties. A Canadian
Government study reports that no new reactor orders
are needed to meet electricity requirements for the
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next several years. In addition, we believe the export
market for AECL's reactors has dried up, at least for
the next few years. As many as one-fourth of its
employees were to be dismissed during November,
according to AECL spokesmen. Although we do not
yet have confirmation, we believe that AECL did
carry out its plans to lay off employees.
We believe that Kraftwerk Union (KWU) in West
Germany has already weathered its worst crisis. Since
the mid-1970s, KWU has received no domestic orders
for a nuclear power plant. Existing orders were tied
up when the West German Government announced
that no new reactors would be licensed until the
utilities could demonstrate satisfactory arrangements
for managing the back end of the fuel cycle and
disposing of radioactive wastes. Industry assessments
indicate that facilities to handle these tasks should be
in place by the end of the decade. In addition, the
government has a new streamlined licensing system,
ending years of procedural delays. As a result, the
West German nuclear power program is progressing
for the first time in years. No new reactor orders have
been placed yet, b~ press reports indicate that one
partial construction permit has been issued and two
more are expected before the end of this year
Like that of France, the Soviet nuclear power pro-
gram is large and continues to grow. The Soviet
nuclear reactor vendor serves as sole supplier to the
domestic nuclear power program. Atomenergoexport,
the export arm of the Soviet reactor vendor, enjoys
strong government support. Analysis indicates that
the USSR has 33 nuclear power reactors in operation.
Given the strength of the domestic nuclear
power program, we believe that the Soviet nuclear
vendor will survive the decade even if Atomenergoex-
port receives no additional export orders. Neverthe-
less, we expect the Soviets to place heavy diplomatic
and economic pressure on the Finns to purchase a
Soviet nuclear power plant as they did in the early
1970s when they sold them two 440 megawatts-
Figure 3
US Domestic Nuclear Reactor Orders
and Cancellations
D Orders
~ Cancellations
Although the US nuclear indus~[ry is the world's
largest, it has been going through a lengthy period of
stagnation. An industry trade group reported that US
reactor vendors have received no domestic reactor
orders since 1978 and have sold no reactors on the
international market since 1979. Of the 13 domestic
reactor orders placed since 1974, 11 have been can-
celed. Atotal of 95 nuclear power reactor orders have
been canceled in the United States since 1971, and
additional reactor plans have been delayed. Many
experts project no new orders for nuclear reactors for
the remainder of this decade. Reactor manufacturers
will face increasingly severe problems as they work off
their construction backlogs. In this decade, industry
observers expect Babcock & Wilcox and Combustion
Engineering to drop out of the nuclear reactor busi-
ness unless either foreign or domestic orders can be
found to sustain them. General Electric and Westing-
house have sizable construction backlogs to help
sustain them through the decade.
electric (MWe) reactors.
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Major Export Potential for US Firms
Mexico. The first phase of Mexico's nuclear power
program consists of two General Electric boiling
water reactors with a total generating capacity of
1,308 MWe. These two reactors are in the mid-to-late
stages of construction at Laguna Verde. In early June
President Portillo's Economic Council decided to sus-
pend the second phase of the Mexican nuclear power
program because of Mexico's financial crisis. This
phase of the program called for an additional 2,400
MWe at the Laguna Verde Nuclear Power Station.
Further government plans calling for the installation
of some 20,000 MWe of nuclear-electric generating
capacity by the year 2000 have been abandoned.
The magnitude of the proposed Mexican nuclear
program generated intense competition among nucle-
ar reactor suppliers. According to the industrial press,
seven nuclear reactor vendors from five countries
submitted technical and financial bids to the Comis-
ion Federal de Electricidad, the Mexican national
utility. The United States was well represented with
bids from Combustion Engineering, General Electric,
and Westinghouse.
At the time of the suspension, France and the United
States appeared to be the leadin candidates for the
sales contract.
Mexican officials have indicated that while they
believe US nuclear equipment and technology are
superior to that offered by France they are not as
certain about the United States as a reliable supplier.
Nor do they have much interest in certain portions of
the nuclear technology package included in the
French reactor deal. If the Mexicans can be persuad-
ed that the United States is a reliable nuclear supplier
and that future administrations will honor commit-
ments made by the Reagan administration, we believe
that US reactor vendors would be virtually assured of
winning the nuclear reactor export orders from Mexi-
co if and when its nuclear Dower nroeram r
we believe it is unlikely that
Potential Reactor Exports, 1982-85
Purchaser
Reactor
Capacity
(MWe)
Likely Suppliers
Argentina
Atucha-3
690
Kraftwerk Union
Brazil
Iquape-1
1,245
Kraftwerk Union
Iquape-2
1,245
Kraftwerk Union
China
Guangdong-1
950
Framatome or
US supplier
Guangdong-2
950
Framatome or
US supplier
Egypt
El Daba-1
900
Framatome
El Daba-2
900
Framatome
Finland
Loviisa-3
1,000
Framatome or
Atomenergoexport
Libya
Surt-1
420 a
Atomenergoexport
Surt-2
420 a
Atomenergoexport
Mexico
Laguna Verde-3
1,200
Framatome or
US supplier
Laguna Verde-4
1,200
Framatome or
US supplier
a This is the rated capacity for this reactor; however, the plant
will be Berated to provide process steam for desalination
facilities.
South Korea. Seoul has one nuclear reactor, a 564-
MWe Westinghouse pressurized water reactor in
operation, and eight reactors totaling more than 6,800
MWe are in various stages of construction. Korean
Government plans indicate that as many as 10 addi-
tional reactors are scheduled to be in operation by the
year 2000. In the long term, Korea will remain a
strong market for nuclear reactor sales, despite recent
delays in the Korean nuclear program.
Except for the sale of a single Canadian CANDU
reactor in the early 1970s, US vendors maintained a
solid grip on nuclear reactor exports to Korea until
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1980, when Framatome's bid to construct the two-
unit power project near Ulchin was accepted. Frama-
tome won the contract in part by offering the Korea
Electric Co. (KECO) the best public loan terms ever
received by KECO. The US Embassy in Seoul reports
that, under the loan agreement, seven French banks
loaned Korea $1.25 billion at 7.5 percent interest. No
payments are due for eight years; thereafter repay-
ment is to be made in 15 equal annual payments. No
other bidder was able to meet these financing terms.
State Department reporting indicates that political
considerations also played a role as Seoul wanted to
broaden economic and political ties with France.
Although France may not be able to offer such
generous financing terms in the future, we believe
French nuclear reactor sales prospects in Korea look
bright. France now has a solid entry in the Korean
nuclear reactor market and can be expected to com-
pete with Westinghouse on a more equal basis. Unless
France can continue to offer below market financing,
we believe Framatome and Westinghouse will divide
the Korean nuclear market. French adoption of a
proposed common line on credit terms for nuclear
power plant financing would help improve the com-
petitive position of US nuclear vendors. Political
considerations, however, will remain a factor. If South
Korea concludes that continued US military and
political support is something that needs to be pur-
chased periodically, we expect that US nuclear reac-
tor sales prospects would be enhanced.
As of 1981 KECO had planned to order four more
nuclear reactors, two in 1982 and two in 1984. Recent
Korean press reports indicate that international bid-
ding for the two reactors scheduled for 1982 has been
officially postponed until 1983. In postponing the
bidding, KECO acted upon recommendations of the
Economic Planning Board. Financial strains and re-
duced growth rates for electricity demand were cited
by the board as reasons for the delay. The Korean
press also reports that bidding on the units originally
scheduled for 1984 will be delayed by at least one and
perhaps two or more years. We expect only two
Korean reactor orders by 1985, and we believe US
vendors are in a strong position to win these contracts
unless France once again offers generous financing.
Taiwan. Like South Korea, Taiwan has an aggressive
nuclear power program. Three nuclear power reactors
are already in operation, and three more are under
construction. Government plans call for 14 additional
nuclear power plants to be in operation by the year
2000, bringing total installed nuclear-electric generat-
ing capacity to more than 20,000 MWe. Taiwan's
ambitious nuclear program has generated consider-
able competition among supplier;;. In the recent bid-
ding, France has once again emerged as the most
aggressive competitor to the US nuclear industry. Not
only did France make a lower overall bid, but the
financial package offered was a virtual replay of
France's deal with South Korea. According to open-
source reporting, Taiwan finally awarded the right to
negotiate the nuclear reactor contract to a US reactor
vendor in March. A British firm was awarded the
right to negotiate the turbine-generator contract. We
believe Taiwan is using this means to increase pres-
sure on potential suppliers to improve the terms of the
contract.
Despite the advanced stage of contract negotiations,
slowing economic growth and actual declines in elec-
tricity demand have forced Taiwan to defer construc-
tion indefinitely. We believe that this delay may hurt
US nuclear reactor suppliers. When bidding resumes
in perhaps two or three years, we; expect France to
agree with the United States to ~i common line on
financing for this particular project. France would
then be qualified to sell nuclear reactors to Taiwan
under the existing US-Taiwan safeguards agreement
and under the trilateral United States-Taiwan-IAEA
safeguards inventory arrangement. Under these cir-
cumstances, France should benefit from the Taiwan-
ese decision to reduce dependence on US nuclear
equipment and technology through the purchase of
such equipment and technology from non-US sources.
Although it is not clear if this factor influenced the
decision to cancel recent contract negotiations, we
believe it will improve French nuclear reactor sales
prospects
China. Beijing has seemed on the; verge of committing
itself to a nuclear power program and ordering West-
ern nuclear reactor systems more; than once during
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the past decade. In 1979 China nearly agreed to
purchase two French 900-MWe nuclear reactors be-
fore breaking off negotiations.
Although the proposed Guangdong Nuclear Station
has passed a number of hurdles, we anticipate addi-
tional delays. The State Council's recent decision to
build a 1,200-MWe, coal-fired electricity generating
plant may further delay approval of the Guangdong
nuclear project, according to the American Consulate
in Hong Kong.
The lack of a Sino-US nuclear cooperation agreement
may prove an insurmountable obstacle, but, if re-
solved, we believe US nuclear reactor vendors could
probably win any contracts resulting from the Guang-
dong nuclear project. State Department reporting
indicates that Guangdong Province officials have a
strong preference for US nuclear equipment and
technology. Analysis of recent West German bids for
nuclear steam supply systems indicates that they have
not been very competitive. We believe that France
will be the principle US competitor for these reactor
export sales. If Paris were to offer subsidized financ-
ing accompanied by somewhat less restrictive safe-
guards requirements, US reactor vendors would find
it very difficult to compete.
Yugoslavia. Belgrade has one reactor undergoing
startup and testing-a 615-MWe Westinghouse pres-
surized water reactor at Krsko. A second nuclear
power plant with a capacity of 1.000 MWe is planned
manufacturer is to be selected for this project in 1984
and major contracts are to be awarded in 1985.
Construction is expected to begin in 1987, and full-
power commercial operation is scheduled for 1995.
We believe US reactor manufacturers might win this
sale if favorable financing terms can be arranged.
with-
nuclear power plants.
out a barter arrangement Yugoslavia's foreign trade
deficits would prohibit the purchase of any additional
Other Potential Sales
Argentina, Brazil, Egypt, Finland, and Libya are
considering placing orders for nuclear power plants in
the next several years. We believe US nuclear vendors
stand little or no chance of securing any of these
reactor sales. Brazil has previously selected Kraftwerk
Union as its reactor supplier. Our analysis indicates
that Argentina also favors the German firm. Al-
though contracts have not been signed, Egypt and
Libya have apparently selected non-US reactor sup-
pliers. Finland is known to be evaluating French and
Soviet technology. According to the press, Pakistan is
seeking to purchase a nuclear power plant, but we
expect Pakistan to be rebuffed because of its poor
nuclear nonproliferation credentials and strong US
pressure to prevent such a sale.
Argentina has one German-built pressurized heavy
water reactor (PHWR) in operation. Two additional
reactors-a nearly complete Canadian CANDU reac-
tor and a second larger German PHWR-are under
construction. The Argentina Government has autho-
rized the purchase of three more reactors scheduled to
be in operation by the year 2000. Argentina's defeat
in the Falkland Islands has caused severe financial
strains, which have slowed the Argentine nuclear
power program. Argentina had been expected to
request bids for an additional nuclear power plant in
1982 or 1983, but these plans have been placed on
hold. Nevertheless, we believe Argentina is strongly
committed to its nuclear program and probably will
order a reactor within the next three or four years.
Kraftwerk Union appears to be the most likely ven-
dor. Argentina has had ongoing problems with Cana-
da over safeguards, costs, and construction delays on
its nearly completed nuclear reactor at Embalse. In
addition, we believe Argentina will not submit to the
full-scope safeguards required by the United States.
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Brazil has one US-built reactor entering operation.
Under a 1975 nuclear cooperation agreement with
West Germany, Brazil is committed to purchase up to
eight West German reactors. Two of these are in the
early stages of construction. Contracts for the third
and fourth are expected to be completed later this
year. Indeed, the Brazilian press reports that site
preparations are under way and component fabrica-
Egypt has plans to have eight nuclear power reactors
totaling 8,400 MWe in operation by the year 2000.
Egyptian Government officials have stated that
France will almost certainly be awarded the contracts
for the first two reactors. France has provided the
technical bids for these reactors; financial terms have
yet to be worked out. According to the US Embassy
in Cairo, France may be willing to finance only one
reactor at this time. The Egyptian Minister of Energy
has stated that contracts for the third and fourth
reactors will probably be awarded to a US nuclear
reactor vendor. Financing, however, will be a crucial
bargaining point. Given the soft oil market, we believe
that lengthy delays in Egypt's nuclear power program
are inevitable.
Finland's two Soviet-built pressurized water reactors
and two Swedish-built boiling water reactors pro-
duced 34 percent of the country's electricity in 1981,
according to industry trade publications. Imatran
Voima Oy, the state-owned electric utility has studies
under way with the Soviet Union and the French firm
Sofratome concerning the feasibility of building a
1,000-MWe nuclear plant. The studies were to have
been completed in 1982, and the US Embassy believes
the Finns will opt to build a plant in 1983.
Libya has an agreement in principle to purchase a
nuclear power plant from the Soviet Union. The plant
will consist of two 420-megawatt pressurized water
reactors that will be derated to supply steam for
desalination facilities. Negotiations have been going
on for several years. While Libya continues to hope
that a contract can be signed sometime in 1983,
significant differences remain. Even if a contract is
signed soon, we believe that cash-flow problems,
foreign exchange requirements, and substantial dif-
ferences concerning the application of nuclear safe-
guards could delay contract implc;mentation until the
latter half of this decade.
Industry Shakeout Ahead
The international market for nucllear reactor exports
continues to be depressed, and prospects fora recov-
ery appear slim, at least in the near term. In the next
three or four years, we expect no more than eight to
10 nuclear reactors will be sold o:n the international
market. The bleak nuclear reactor export market has
combined with a prolonged stagnation in most domes-
tic nuclear power programs to threaten the vitality of
the nuclear reactor vendors. Indeed, the world now
suffers from severe overcapacity in the nuclear reactor
component fabrication industry, rind we expect an
industrywide shakeout.
Framatome has sold eight nuclear power reactors for
export, although two of these orders were canceled
because of the Iranian revolution. Having captured 33
percent of the nuclear reactor export market in the
past three years, France has emerged as the single
most aggressive US competitor for nuclear power
plant exports. Most countries have reported a prefer-
ence for US nuclear technology a.nd perceive French
suppliers to be less experienced. "Co counter this view,
Paris offers preferential financint; and less restrictive
safeguard agreements. In addition, we believe
France's large and successful domestic nuclear power
program will increasingly advertise French experience
and capabilities. As this experience and expertise is
demonstrated, we believe Framatome will be able to
compete with US reactor manuf~icturers without hav-
ing to rely on subsidized financing. Nevertheless,
recent plans to cut back the French domestic nuclear
power program argue strongly for the continuation of
subsidized financing to increase export sales and to
maintain employment levels in ttie French nuclear
industry.
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The Swedish nuclear reactor vendor, ASEA-Atom,
may be the first casualty in this industry shakeout.
Nine reactors have been built by ASEA-Atom, two of
which were export sales to Finland. Two additional
reactors are in the midstage of construction. With
limits on Sweden's domestic nuclear power program
and weakness in the current export market, we believe
ASEA-Atom's chances for any nuclear reactor sales
are slight. Indeed, press reports indicate that ASEA-
Atom probably will reorganize as a nuclear service
company to retain its skilled personnel.
A recent report by the Canadian Government indi-
cates that the near-term prospects for Atomic Energy
of Canada, Ltd., and the Canadian nuclear industry
are not favorable. The report predicts a substantial
contraction in the nuclear industry and suggests that
direct government intervention may be necessary to
preserve the nuclear power option. Press reports con-
firm that the industry already is retrenching, laying
off employees, and expanding into the nuclear service
sector. The government report indicates that the best
near-term prospects for maintaining Canada's nuclear
industrial capabilities are through additional reactor
export sales and through the export of electricity
generated by Canadian reactors.
The Canadian Government seems to be taking this
report seriously. Indeed, the Minister of Energy has
publicly expressed government support for the export
of nuclear-generated electricity to the United States.
Such a program would benefit the Canadian nuclear
industry and generate considerable profit and foreign
Despite opposition in Parliament, the Canadian Gov-
ernment is reported by the press to be considering the
use of concessional financing to encourage foreign
reactor sales. Over the longer term, we believe the
Canadian nuclear industry will survive, albeit with
reduced capacity.
Kraftwerk Union (KWU), the West German reactor
vendor, is expected to fare somewhat better, having
already cut back its work force as a result of stagna-
tion in the West German domestic nuclear power
program beginning in the mid-1970s. While we expect
KWU to remain in the nuclear business without direct
government subsidy, it will continue to limp along at
well below capacity. Kraftwerk Union has sold 11
reactors for export. Two of these orders were canceled
because of the Iranian revolution. We expect a third
export order, for Trillo-2 for Spain, to be canceled by
the new Spanish Socialist Government. Except for
potential reactor sales to Brazil, near-term export
prospects do not look encouraging for the German
nuclear industry; nevertheless, current and planned
domestic nuclear power plant construction should be
sufficient to ensure Kraftwerk Union's survival as a
nuclear reactor vendor. In addition, KWU already
has considerable business in the nuclear service sector
in upgrading and retrofitting existing reactors to meet
new safety requirements.
Atomenergoexport, the Soviet nuclear reactor vendor,
enjoys strong government support for export reactor
sales and has a nearly captive market for such sales to
the Communist Bloc. The USSR has sold 32 reactors
to the international export market. Finland is the only
non-Communist country to have purchased Soviet-
built nuclear power reactors, and we do not expect
Atomenergoexport to compete much with the West-
ern reactor export market.
Implications for US Vendors
Until the late 1970s, US manufacturers dominated
the nuclear reactor export market. Westinghouse and
General Electric have sold a total of 69 reactors on
the international market. Because of increased com-
petition, concessional financing, and negative reac-
tions to the Nuclear Non-Proliferation Act of 1978,
the US share of the world market for nuclear reactor
exports has fallen steadily. Although US manufactur-
ers have not sold a reactor for export since 1979, we
believe US reactor vendors might secure orders from
South Korea. China, Mexico, and Taiwan are other
candidates for US sales in the next three or four
years. Yugoslavia may also purchase a reactor of US
manufacture, but probably not before the latter part
of the decade. Although US export sales prospects
have improved, competition will be fierce. On balance,
we believe US manufacturers will be unable to cap-
ture more than about four export orders in the next
25X1
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Figure 4
United States Share of Nuclear Reactor
Export Market a
~ ~ ~ ~ ~ ~
0 1971 73 75 77 79 81
few years. Unless these potential sales go to the
weakest US nuclear reactor vendors, that is, Combus-
tion Engineering or Babcock & Wilcox, export reactor
sales will have little effect on the vitality of the US
nuclear industry.
Industry Outlook
Slack demand in both domestic and export markets
has caused severe overcapacity in the nuclear reactor
industry, and we expect an industrywide shakeout. As
the decade progresses, we believe at least three nucle-
? ar reactor vendors will stop production. Those vendors
remaining in the business will be operating at greatly
reduced capacity. As orders are filled and the con-
' struction backlog is reduced, nuclear reactor vendors
will be forced to concentrate more and more on the
nuclear service business
Unless nuclear reactor vendors dismantle their sur-
plus production capabilities, the physical capacity to
build nuclear reactors will not diminish. Critical
technical, engineering, and managerial skills, howev-
er, will be lost because, as the nuclear reactor vendors
cut their construction backlog, the growing nuclear
service industry will not be sufficient to absorb all
those technical personnel. In addition, the nuclear
service business requires a different mix of technical
and engineering skills
sites.
As a result, we believe the skill; necessary for the
design, construction, and licensing of nuclear power
plants will be dispersed. Although this loss of skills
should pose no problem for the nuclear reactor ven-
dors for the next several years, a sharp resurgence in
orders in the late 1980s or early 1990s could find the
industry with insufficient trains;d manpower. This is
particularly true if construction. leadtimes are slashed
by streamlined regulations and the use of preapproved
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