Westinghouse still facing difficulties in Ukraine

In a vacuum, Westinghouse's recent setbacks with fuel assemblies in the Ukraine could be interpreted just as the utility EnergoAtom described them: minor structural defects.

Eastern Europe, however, is far from a vacuum.

In the nuclear world, it's one of the front lines in a commercial battle between the U.S. nuclear giant, Cranberry-based Westinghouse Electric Co., and Russia's state-owned Rosatom.

Not to mention the word "minor" doesn't fit anything about a nuclear reactor, least of all in a country that's home to Chernobyl, the worst nuclear disaster in history.

While Westinghouse and EnergoAtom remain optimistic that the structural issues are behind them, Ukraine's nuclear regulators are more cautious. And Russia is ready to step in to reclaim its monopoly over the country's nuclear operations.

"You still have a split in the Ukraine," said Bob Percopo, a consultant to nuclear companies and the U.S. Department of Energy.

Some in the Ukraine government want to assert their independence from Russia, while others cling to old Soviet dynamics of Russia as protector.

"And typical of Russia, they don't want to lose any of their influence on anything that was part of former Soviet Union," Mr. Percopo said.

Westinghouse has been trying to gain a foothold in Ukraine for more than a decade by tailoring its fuel services to the country's Russian-made reactors. Its involvement there began after the U.S. government signed on to help Ukraine experiment with Western-made fuel in its reactors. The former Soviet republic has always relied on Russia to supply its fuel but wanted to hedge its bets with other suppliers. Ukraine is already dependent on Russia for its natural gas supplies.

In 2005, Westinghouse got a commercial contract with EnergoAtom to supply fuel assemblies between 2011 and 2015.

In 2012, during a routine inspection, the utility reported that Westinghouse's assemblies had structural damage. It had to swap those for Russian-made fuel assemblies, which the utility estimated cost $170 million.

EnergoAtom's attorney told Ukrainian media recently that the utility is preparing documents to file a suit against Westinghouse.

Earlier this summer, Westinghouse submitted a design proposal to the Ukrainian nuclear regulator for amending its fuel assemblies to resolve the alleged defects.

Then, in mid-July, inspectors found defects in another set of assemblies.

Scott Shaw, a spokesman for Westinghouse, declined to comment on the consequence of the situation and, instead, provided this statement:

"Westinghouse continues to discuss long-term fuel supply to Ukrainian reactors; there is a mutual recognition of the value of competitive supply and technology diversification. We believe our fuel is of high quality and we fully expect a long-term presence in the Ukrainian fuel market."

This is Westinghouse's second attempt to fuel Russian-made reactors. In 2000, it began supplying nuclear fuel to CEZ, a Czech utility, for two reactors that it helped to modify at CEZ's Temelin station. In 2009, Russian company TVEL took that business away.

Now, the two rivals have returned to Temelin for a fight over an even bigger prize -- the contract to build two new nuclear reactors, a $10 billion project.

Westinghouse and Rosatom are the final two bidders under consideration by the Czech utility. It's a capitalist Cold War showdown.

But Mark Hibbs, senior associate in the nuclear policy program with the Carnegie Endowment for International Peace, said there's at least one benefit for Westinghouse if Russia succeeds in its plans to pepper the world with its reactors.

To the extent that Westinghouse can prove its fuel is safe and effective inside Russian-made reactors, the American company can wait for Rosatom to build new plants in foreign countries, then come in and try to undercut Russia on fuel contracts.

That's one of the motivations behind Westinghouse's work in Ukraine, Mr. Hibbs said, even with the setbacks the company has suffered there.

"As Russia's nuclear universe expands, it would be logical for Westinghouse to piggyback on that emerging market," he said.