Tags: Donald Trump | Westinghouse | China

Trump Team Takes Steps to Keep Chinese Away From Westinghouse

Image: Trump Team Takes Steps to Keep Chinese Away From Westinghouse
(Reuters)

Wednesday, 05 Apr 2017 08:23 AM

The Trump administration is so alarmed that Chinese investors may try to purchase Westinghouse Electric Co.'s nuclear business that U.S. officials are trying to find an American or allied buyer for the company instead, two people familiar with the matter said.

Cabinet members including Energy Secretary Rick Perry and Treasury Secretary Steven Mnuchin have discussed preventing Westinghouse's purchase by a Chinese-linked company, three U.S. officials said. The administration is preparing for Westinghouse to come up during President Donald Trump's first meeting with Chinese President Xi Jinping at his Mar-a-Lago resort in Florida on Thursday and Friday, an official said.

For years, Chinese entities have been interested in Westinghouse, and the nuclear reactor builder has been a repeated target of Chinese espionage. Westinghouse filed for Chapter 11 bankruptcy protection on March 29 and its parent company Toshiba Corp. is seeking a buyer for its money-losing reactor business.

Trump administration officials and members of Congress are concerned the bankruptcy filing could allow a bid from an investment group with hidden Chinese backing, one of the officials said. All of the officials requested anonymity because of the sensitivity of the matter.

Nuclear Secrets

Among the chief concerns in the event of a Chinese purchase is the disclosure of nuclear technological secrets that could be used for either military or civilian purposes. The U.S. would almost certainly stop an open Chinese bid for majority ownership of Westinghouse’s nuclear business, a third official said. The government has legal authority to regulate corporate acquisitions involving sensitive national security technology.

The Japanese government would also oppose any effort to sell the Westinghouse business to a Chinese buyer, according to people familiar with the matter. Japanese officials have made that point clear to Toshiba executives, one of the people said.

Toshiba said it replaced Westinghouse Chairman Daniel Roderick with Mamoru Hatazawa. Roderick resigned all posts at the U.S. unit, according to a person familiar with the matter, who asked not to be identified because the details aren’t yet public.

Westinghouse spokeswoman Sarah Cassella declined by email to comment late Tuesday.

Southern Co. Concerned

Perry, Mnuchin, Secretary of State Rex Tillerson and Commerce Secretary Wilbur Ross are involved in discussions about how the administration would address a sale of the business, the officials said.

Southern Co. CEO Thomas Fanning also has met with Perry and Tillerson to discuss Westinghouse’s fate, according to a person familiar with the discussions. The utility company has a stake in avoiding disruption of Westinghouse’s operations because the company is building two nuclear reactors for Southern subsidiary Georgia Power.

Administration officials so far have examined three potential courses to keep Westinghouse out of Chinese hands, said the person familiar with the discussions. The government might block a sale to a Chinese buyer; encourage an alternative bid from U.S. or friendly foreign investors; or the government might invest in the company directly in return for an equity stake, akin to the Obama administration bailout of U.S. automakers.

One national security watchdog gave U.S. officials an early warning. Former U.S. Navy Commander Kirk Lippold sent Tillerson a letter two days before Westinghouse filed the bankruptcy papers. Westinghouse not only builds nuclear reactors in the U.S. but is responsible for maintenance at current reactors, said Lippold, who was the commander of the USS Cole when the ship was attacked off the coast of Yemen in 2000.

“Do we want that maintenance to be done by the Chinese? There are some bona fide national security issues to giving the Chinese that kind of access to our power grid backbone,” Lippold said in an interview Tuesday.

CFIUS Review

Any bid by Chinese investors would require approval by a panel known as the Committee on Foreign Investment in the U.S., which reviews foreign acquisitions of U.S. companies for national security risks. Mnuchin chairs the panel. 

The committee, which includes the secretaries of the Treasury, Energy, Defense, State and Commerce departments, can impose changes to transactions or, in rare cases, recommend to the president that they be blocked. The panel has a maximum 75 days to complete its review.

China was the leading source of investments reviewed by CFIUS from 2012 to 2014, accounting for almost a fifth, according to Rhodium Group, a private research firm.

“By law, information filed with CFIUS may not be disclosed by CFIUS to the public. Accordingly, we cannot comment on specific transactions, including whether or not certain parties have filed notices for CFIUS review,” a Treasury spokesman said.

A top Japanese government official has told Perry his government is worried about Toshiba’s financial future if the conglomerate is unable to sell Westinghouse’s reactor business, a U.S. official said.

Chinese Deals

U.S.-based venture capital firms with substantial ties to China have generated concerns in Congress. Most recently, Republican Representative Robert Pittenger of North Carolina wrote to the Treasury Department to object to Canyon Bridge Capital Partners’ purchase of Lattice Semiconductor, a producer of U.S. military applications and technology. The venture capital firm “appears to be directly affiliated” with the Chinese government, Pittenger said in a December letter.

Barack Obama blocked two Chinese deals when he was president: one for a wind farm in Oregon and the other for the U.S. business of Germany’s Aixtron SE, a semiconductor supplier.

Westinghouse supplied the world’s first commercial pressurized water reactor more than half a century ago in Pennsylvania. There are currently more than 430 nuclear power stations globally, with about half based on Westinghouse technology.

Toshiba bought Westinghouse for $5.4 billion in 2006. The company foresaw rising demand for nuclear power in the U.S., U.K. and China. Instead, natural gas became cheaper and the 2011 nuclear disaster in Fukushima, Japan, further soured the public on nuclear energy. The Japanese conglomerate has already lost $6 billion on the purchase.

Five Chinese military officials were indicted in absentia in 2014 for allegedly stealing trade secrets from Westinghouse through computer hacks. A state-owned company, China General Nuclear Power Corp., was indicted in 2016 for conspiring to steal restricted nuclear technology from Westinghouse.

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The Trump administration is so alarmed that Chinese investors may try to purchase Westinghouse Electric Co.'s nuclear business that U.S. officials are trying to find an American or allied buyer for the company instead, two people familiar with the matter said....
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Wednesday, 05 Apr 2017 08:23 AM
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