By Tom Hals, Makiko Yamazaki and Tim Kelly
| WILMINGTON, DEL./TOKYO
WILMINGTON, DEL./TOKYO Westinghouse Electric Co, a unit of Japanese conglomerate Toshiba Corp, filed for bankruptcy on Wednesday, hit by billions of dollars of cost overruns at four nuclear reactors under construction in the U.S. Southeast.Bankruptcy will allow Pittsburgh-based Westinghouse to assess whether to continue construction of the first new U.S. nuclear power projects in three decades for utility companies SCANA Corp and Southern Co. The company also provides nuclear design, engineering and decomissioning work around the globe, and said in court filings that its nuclear fuel and power plant servicing operations are "very profitable." Westinghouse and affiliates intend to use bankruptcy to "isolate them from the one specific area of their businesses that is losing money: their construction of nuclear power plants in Georgia and South Carolina," the company said in a filing in Manhattan's U.S. Bankruptcy Court.For Toshiba, the filing will help keep the parent company afloat and ringfence it from soaring liabilities from Westinghouse. Toshiba said Westinghouse-related liabilities totalled $9.8 billion as of December, making it one of the industry's most costly collapses to date.The bankruptcy will trigger complex negotiations between the Japanese conglomerate, Westinghouse and the utility companies, which are among the main creditors. It could also embroil the U.S. and Japanese governments, given the scale of the collapse and the $8.3 billion in U.S. government loan guarantees that were provided to help finance the reactors.Westinghouse said in a court filing it has secured $800 million in financing, provided by Apollo Investment Corp, an affiliate of Apollo Global Management, to fund and protect core businesses during its reorganization. Toshiba, whose shares have crashed as the nuclear problems surfaced, said it would guarantee up to $200 million of the financing for Westinghouse. Toshiba shares closed up 2.2 percent.SCANA, which owns majority of the V.C. Summer project in South Carolina, said it had reached an agreement with Westinghouse to continue the work while it determines "the most prudent path forward for the project."In a February presentation, it said that it might include abandoning the project. Construction is about one-third complete, according to recent regulatory filings.
Southern Co said in a statement it would hold Westinghouse and Toshiba accountable for its contract and was "conducting a full-scale schedule and cost-to-complete assessment." Stan Wise, who heads Georgia's Public Service Commission that regulates Southern Co's utility in the state, said the bankruptcy might mean the Vogtle project in Georgia will be abandoned. The project is about 36 percent complete, according to testimony at a commission meeting in September."There is a reason Westinghouse is exiting the process and bankrupt. Something told them the pain for them can only get worse," said Wise in an interview with Reuters on Wednesday. "I hope there is a way for this process and contract to continue." The South Carolina Public Service Commission, which like Wise's commission must approve utility rate increases to help finance the projects, did not immediately respond to a request for comment.
Shares of SCANA were down 2.3 percent at $64.61 and Southern Co fell 1 percent to $49.58 in trading on the New York Stock Exchange. NUCLEAR RENAISSANCE
Regulators in Georgia and South Carolina approved the construction of Westinghouse's AP1000 reactors in 2009, a sign of a nuclear renewal taking hold in the United States.However, the rush to develop new nuclear power projects began to stall by the end of 2011 as technological advances brought a flood of cheap natural gas and the United States failed to adopt legislation curbing carbon emissions. The Fukushima nuclear accident in Japan also slowed worldwide nuclear development and enhanced safety measures caused delays at Westinghouse's projects in Georgia and South Carolina. Toshiba acquired Westinghouse in 2006 for $5.4 billion, then a major bet on a rebirth in nuclear projects due to high oil and gas prices, convinced that governments would cap carbon emissions to prevent global warming.
The company expected to build dozens of its new AP1000 reactors - which were hailed as safer, quicker to construct and more compact - allowing it to build a pipeline of future work for its nuclear power plant maintenance division. NUCLEAR FALLOUT
Toshiba has said it expects to book a net loss of 1 trillion yen ($9 billion) for the year ending in March, up from an earlier loss forecast of 390 billion and one of the biggest annual losses for a Japanese company ever. Westinghouse's bankruptcy, the latest financial debacle to buffet corporate Japan, comes on top of a separate 2015 accounting scandal for Toshiba. To cover upcoming losses, it has put its prized memory chip unit up for sale."Toshiba concluded that a Chapter 11 filing was essential to rebuild Westinghouse," Toshiba CEO Satoshi Tsunakawa said at a news briefing in Tokyo.Westinghouse has nuclear projects in varying degrees of development in India, the United Kingdom and China. The U.S. unit said its operations in Asia, Europe, the Middle East and Africa would not be impacted by the bankruptcy filing.($1 = 111.0600 yen) (Reporting by Makiko Yamazaki and Tim Kelly; Additional reporting by Kentaro Hamada, Yoshiyasu Shida, Taiga Uranaka, Hitoshi Ishida and Sam Nussey in Tokyo, Scott DiSavino and Jessica DiNapoli in New York and Tom Hals in Wilmington, Delaware; Writing by Naomi Tajitsu and Clara Ferreira Marques; Editing by Noeleen Walder, Edwina Gibbs and Bernard Orr)
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Updated Date: Mar 29, 2017 21:11:13 IST