Wall Street Journal (US): Toshiba’s Westinghouse Electric Files for Bankruptcy Protection
Toshiba’s Westinghouse Electric Files for Bankruptcy Protection
Chapter 11 raises questions about the fate of four half-finished nuclear reactors in the U.S.
By RUSSELL GOLD in Austin, Texas, and MAYUMI NEGISHI in Tokyo Updated March 29, 2017 4:59 p.m. ET
Westinghouse Electric Co. filed for chapter 11 bankruptcy protection Wednesday, setting off a showdown between the nuclear power company’s Japanese parent and a major U.S. utility, and threatening to drive a wedge between allied governments over the fate of industries each considers vital. Westinghouse had incurred billions in cost overruns related to four nuclear reactors it is building in the southeastern U.S. The runaway costs from the half-finished reactors threatened the viability of its Japanese parent company, Toshiba Corp., the precarious finances of which have attracted attention of Japan’s government. “This is a de facto withdrawal from the overseas nuclear business for us. Therefore, we don’t see any more risk,” said Toshiba Chief Executive Satoshi Tsunakawa on Wednesday. But Toshiba now faces an angry customer in Tom Fanning, the CEO of Southern Co., the Atlanta power company and primary owner of two of the reactors being built in Georgia. Mr. Fanning on Wednesday characterized the completion of the reactors as an international political issue, calling it a test of Prime Minister Shinzo Abe’s commitments with President Donald Trump at a summit in February to help create American jobs. “The commitments are not just financial and operational, but there are moral commitments as well,” Mr. Fanning said in an interview from Tokyo, where he had traveled to lobby for a resolution to the mounting dispute. He has said there are 5,000 jobs directly at stake at the two Georgia reactors, jobs that could be lost if Toshiba doesn’t commit to paying billions in future costs. Westinghouse designed the reactors and also is building them for Southern, and contractually had agreed to shoulder cost overruns.
After the bankruptcy filing, Southern and Scana separately said they would finance continued construction of the reactors for 30 days, but weren’t clear where construction funding would come from after that time. Scana also said, for the first time, that it would consider abandoning the two reactors underway if costs changed dramatically. Mr. Fanning, who said he has spoken to Vice President Mike Pence, Commerce Secretary Wilbur Ross and Energy Secretary Rick Perry about the importance of completing the reactors, argued that more was at stake economically than the direct future of the facilities. “Westinghouse declaring bankruptcy has national security implications,” said Mr. Fanning, who also is chairman of the Federal Reserve Bank of Atlanta’s board. He said the estimated cost of the entire project was roughly $16 billion, but cautioned that the companies were unsure of how much more was needed to finish the partially built reactors. The current target dates for completion of the Georgia reactors are 2019 and 2020, three years behind the original schedule. Richard Nephew, a fellow at the Center on Global Energy Policy at Columbia University, said Mr. Fanning appeared to be using the Trump administration’s reputation for defending U.S. jobs and taking a tough stance even with allies, to his advantage. “This is someone who knows what the triggers are for this administration,” Mr. Nephew said. “Everyone now has a sense of what the president’s triggers are and I wouldn’t be surprised if a lot of companies use those triggers to gain an advantage in negotiations with foreign companies.” The bankruptcy filing will likely cast a pall over future nuclear projects. Mycle Schneider, a Paris-based independent consultant on nuclear and energy policy, noted that it is just the latest global nuclear builder to pull back or run into deep problems. He pointed to Siemens AG’s decision to abandon the industry, Areva SA’s financial and safety problems, the falling market value of China General Nuclear Power Group and the junk-bond status of Russia’s Atomenergoprom as evidence of turmoil in the business. “I don’t see how this can mean anything but even greater cost growth for the plants under construction and an unacceptable risk for any that are under consideration,” said Fred Beach, assistant director of the Energy Institute at the University of Texas at Austin. In filings, Westinghouse said it obtained $800 million in debtor-in-possession financing, allowing it to continue operations. Westinghouse was one of the originators of the nuclear age, building the world’s first commercial nuclear reactor 60 years ago. Its pressurized water reactor design is in 430 power plants and accounts for 10% of electricity generated in the world. A person familiar with Toshiba’s planning said the company is interested in handing control of Westinghouse to Korea Electric Power Corp., known as Kepco, which is building a reactor in the United Arab Emirates. A Kepco spokesman said “we have received no official offer from Toshiba. If any offer comes, we will put it under careful review.” Edwin Lyman, who tracks the nuclear industry for the Union of Concerned Scientists, said a government interested in pollution-free power could still build nukes, but no one should assume it can be done more cheaply than other power sources, or underestimate the potential problems that can occur. “If a government wants nuclear power, it is going to have to pay for it,” he said.
Matt Jarzemsky and Peg Brickley contributed to this article.
Write to Russell Gold at russell.gold@wsj.com and Mayumi Negishi at mayumi.negishi@wsj.com
See also:
Fox Business, "Toshiba’s Westinghouse Files For Chapter 11 Bankruptcy", 29 March 2017