US demands American owner for Westinghouse

Pressure is mounting on the UK government to sell Westinghouse, the profitable American arm of British Nuclear Fuels (BNFL), to one of its compatriots amidconcerns about foreign companies threatening national security by buying US companies.

While the UK's publicly-owned BNFL has managed Westinghouse since 1999, the prevailing view among politicians in Washington is that the major nuclear engineering company on its soil should be owned by an American firm. The position has serious implications for some of the bidders for the Pittsburgh-based group, a sale which could raise up to $2bn (£1.1bn).

Among the heavyweight contenders that have made bids are Japan's Mitsubishi Heavy Industries, a long-time business partner of Westinghouse, and Toshiba. South Korea's Doosan Heavy Industries has entered the fray. All three are likely to lose out in the auction, making the most likely contenders to clinch the prize the US titan General Electric, which has teamed up with the New York-based hedge fund Cerberus, and the Louisiana-based Shaw.

NM Rothschild, BNFL's banker, is considering the offers for Westinghouse, which the British government is keen to sell partly because nuclear assets are highly priced, and because it is keen to remove the risk of possible accidents from being a public responsibility. It is also selling British Nuclear Group, which is decommissioning spent nuclear fuel in the UK.

Those stepping up the campaign to keep sensitive businesses in American hands include Richard Shelby, the chairman of the Senate banking committee. He is among a group of influential politicians who want a more robust investigation into potential national security threats when foreign companies bid for American ones. The move comes after China's Cnooc bid for Unocal, the California-based oil company, this summer, causing widespread anxiety on Capitol Hill. Such bids are vetted by the White House-controlled committee on foreign investments. The committee, CFIUS, did not have to rule on the Unocal situation in the end because Cnooc pulled out.

A congressional watchdog said in a recent report that CFIUS, which comprises 12 government agencies, reviewed deals based on a definition of national security that was too narrow, and did not have adequate time to review transactions. Mr Shelby said last week: "The Treasury Department [which chairs CFIUS] may believe that the process is sufficiently transparent. We most certainly do not agree."

As Westinghouse operates in the nuclear sector, with its associations with possible military use, its sale would almost certainly be reviewed by CFIUS, and any foreign buyer would find it difficult to overcome the national security concerns. In addition, America's powerful Nuclear Regulatory Commission (NRC) will review any deal.

A spokesperson for the NRC said the body's jurisdiction would include ensuring any buyer had the financial and technical capabilities to take on Westinghouse.