Westinghouse Shifts From Building to Dismantling
Bloomberg, 29 mars 2017 à 22:56 UTC+2
by Tiffany Kary
“Westinghouse proudly states on its website ‘we are nuclear energy.’ If Westinghouse was nuclear energy, Westinghouse’s bankruptcy illustrates that there are no prospects for major new nuclear plants,” said Mycle Schneider, a nuclear industry analyst. Toshiba Corp. bought Westinghouse in 2006 as a bet on the future of nuclear power, a hope that soured after Japan’s 2011 Fukushima meltdown and a flood of cheap natural gas in the U.S. damped demand.
The company still believes other parts of its business are viable, said Lisa J. Donahue, a managing director with AlixPartners LLP, which is advising Westinghouse. Its operating plant unit, for example, provides services to 80 percent of the operating nuclear power plants in the world, and is “very profitable,” Donahue said in a court filing.
Industry Meltdown?
The atomic-power industry has shown signs of trouble for years. Germany’s Siemens AG abandoned its nuclear business in 2011, while Areva SA was this year bailed out by parties including the French government. Of 754 reactors world-wide, 90 have been abandoned at various stages of construction, including 40 in the U.S., 12 of which are Westinghouse’s, according to the Global Nuclear Power Database.
“The Europeans and the U.S. have forgotten how to build large nuclear power plants,” Chris Gadomski, an an analyst for Bloomberg New Energy Finance, said Wednesday. “It’s increasingly becoming a Chinese industry,” he added, noting that Russians are the other main competitors in markets including Saudi Arabia, which has proposed building 16 nuclear power plants, and South Africa, which has discussed building almost 10.
The Sept. 11, 2001 terror attacks in the U.S. led to new requirements for reactor design from the Nuclear Regulatory Commission, which created construction delays for Westinghouse, creating financial trouble, the company said in court filings. Its new technology, AP1000, was supposed to make reactors easier to build, less expensive, and safer. Instead, the four unfinished reactors in Georgia and South Carolina may now be abandoned.
Cost Overruns
The projects in the two southern states were the first to be approved for construction by U.S. regulators since the 1979 accident at Three Mile Island. The reactors broke ground in 2011 and were supposed to come online in 2016. Four facilities under construction in China are facing similar delays: they were projected to be ready in 2013 and 2014, a timeline that has been pushed back to this year or next.
In announcing the filing Tuesday, Japan’s Toshiba said it would take a loss of $9.1 billion, even wider than the $6 billion already anticipated. Cost overruns and problems at the four reactors — its Vogtle and V.C. Summer projects, in Georgia and South Carolina — had exposed the company to billions of dollars in liabilities and penalties, said AlixPartners’s Donahue. The company filed for bankruptcy with as much as $10 billion of debt.
Westinghouse seeks court permission to have South Carolina Electric & Gas Co., a subsidiary of Scana Corp., and Georgia Power, a subsidiary of Southern Co., which it had partnered with on those projects, take on the cost of construction while it mulls their ultimate feasibility, according to court papers.
Relinquishing Priority
The Vogtle and VC Summer plant owners have agreed not to try to get ahead of other creditors in claiming money in the bankruptcy. Usually, construction work done after a bankruptcy can claim priority ahead of others. The decision will allow Westinghouse to decide whether those reactors are ultimately feasible later, in a “cost-neutral” way, and remove the risk that construction costs pose to its other businesses, the company said.
Among debts to be dealt with in the Chapter 11 case, the company has $250 million in promissory notes that Toshiba loaned it on an emergency basis Feb. 6 and Feb. 13, and $493.7 million outstanding under a 2009 credit facility for which BNP Paribas serves as an agent. As of the bankruptcy, the BNP Paribas facility was backed by cash collateral worth 105 percent of its face value and is also backed by a guarantee from Toshiba, the company said.
New Funding
It has announced an $800 million loan to fund operations as it reorganizes, by Apollo Investment Corp. as an initial lender and including a a $225 million letter of credit facility with Citigroup Global Markets Inc., as issuing bank, according to court papers.
A first-day hearing to consider the company’s request for construction agreements on the Georgia and South Carolina projects is pending before U.S. Bankruptcy Court Judge Michael Wiles in Manhattan. So far, the company has made requests to have more time to file a full list of its assets and debts, and approve the agreements with owners of the South Carolina and Georgia plants.
Security concerns may also pose a challenge in the restructuring, Bloomberg’s Gadomski said. U.S. officials may feel pressure to arrange an American buyer for Westinghouse, based in Cranberry Township, Pennsylvania, to assure it retains a national champion in the nuclear construction business and some control over the proliferation of nuclear materials, he said.
The case is In re Westinghouse Electric Company LLC, 17-10751, U.S. Bankruptcy Court, Southern District of New York.
See also...
Mint (India), "Westinghouse’s change in focus signals decline of US atomic energy industry", 30 March 2017- 09 40 AM IST