Westinghouse filed for Chapter 11 protection from creditors today to enable strategic restructuring amid "financial and construction challenges" in its US AP1000 power plant projects. For its Japanese majority owner, Toshiba Corp, the move helps stem further liabilities from guarantees it provided its USA-based unit, which were $9.8 billion as of December.
Both companies stressed that only Westinghouse's US operations would be affected by the filing.
José Emeterio Gutiérrez, Westinghouse's interim president and CEO, said: "Today, we have taken action to put Westinghouse on a path to resolve our AP1000 financial challenges while protecting our core businesses. We are focused on developing a plan of reorganisation to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader."
Westinghouse - which made the filing at the US Bankruptcy Court for the Southern District of New York - said it has obtained $800 million in debtor-in-possession (DIP) financing from a third-party lender to help fund and protect its core businesses during its reorganisation.
Toshiba said it would guarantee up to $200 million of the financing for Westinghouse and that the Pittsburg-headquartered company would be "deconsolidated" from its books, starting from the FY2016 full-year business results.
Westinghouse's shares are split between Toshiba (87%), KazAtomProm (10%) and IHI Corporation (3%). KazAtomProm, Kazakhstan's state-run uranium producer, is entitled to sell its 10% equity holding in Westinghouse pursuant to put option agreements that can be exercised on or after 1 October, Toshiba said.
Westinghouse said the DIP financing will fund its core businesses of supporting operating plants, nuclear fuel and components manufacturing and engineering as well as decommissioning, decontamination, remediation and waste management as the company "works to reorganise around these strong business units". Existing letters of credit have been "cash collateralised in full and will remain in place", it said. The financing will also allow for new letters of credit to be issued.
Limited to USA
Toshiba, which bought Westinghouse in 2006, warned in December last year that it might have to write off "several billion" dollars because of Westinghouse's purchase in 2015 of US construction firm CB&I Stone & Webster (S&W). Upon closing of that transaction, Westinghouse assumed full responsibility for all AP1000 projects and the nuclear integrated services business. Since then, Toshiba and CB&I - S&W's former parent company - have been in dispute over the business's true value.
Westinghouse is constructing eight AP1000 pressurized water reactors - four in the USA (two each at Vogtle and Summer) and four in China (two each at Sanmen and Haiyang) - with S&W as its consortium partner.
Sanmen unit 1 is expected to be the first AP1000 to begin operating, in September, and the other three Chinese AP1000s are scheduled to be in operation by the end of this year. The four US units are scheduled to start operations between 2019 and 2020.
On 14 February, Toshiba said Westinghouse would be required to book a $6.1 billion write down for cost overruns at Vogtle and Summer.
The Summer units are being built for Scana Corporation's subsidiary South Carolina Electricity and Gas (SCE&G) and co-owner Santee Cooper, while the Vogtle units are for Georgia Power, a subsidiary of Southern Company. Construction of all four US AP1000s began in 2013.
Westinghouse said today it had reached an agreement with each owner of the US AP1000 projects to continue these projects during an initial assessment period. Toshiba said such arrangements would "contemplate that the owners would make payments for construction-related costs while the parties continue to explore and assess a comprehensive solution regarding the sites".
Scana and Santee Cooper said today they had been working with Westinghouse in anticipation of the bankruptcy filing to reach an agreement, subject to bankruptcy court approval, that allows for work on the project to continue toward completion of the units. This agreement, filed today with the court as part of Westinghouse's bankruptcy filings, "will provide SCE&G and Santee Cooper the time necessary to perform due diligence related to cost and schedule. It gives us critical direct access to resources and information that Westinghouse had not provided us to date, which will be important as we plan for the future of the project," Lonnie Carter, Santee Cooper president and CEO, said.
Westinghouse said it "remains committed" to its AP1000 technology and will continue its existing projects in China as well as the pursuit of other potential projects in the future.
Westinghouse's operations in its Asia and Europe, the Middle East and Africa regions are not impacted by the Chapter 11 filing, it said. Customers in those regions "will continue to receive the high-quality products and services they have come to expect in the usual course as the regions will also be supported by the DIP financing".
Toshiba has a 60% stake in NuGen, a joint venture with France's Engie, which plans to build a new nuclear power plant in Cumbria in the UK. Three AP1000s are proposed for the Moorside site.
NuGen said on 14 February that Toshiba was committed to Moorside despite announcing that day it would reduce its exposure to reactor construction projects outside Japan. Toshiba also said it would "consider participating in the Moorside project without taking on any risk from carrying out actual construction work". A NuGen representative said it was always NuGen's plan to identify an independent constructor.
UK regulators said last week they expect to complete the Generic Design Assessment of the AP1000 this month.
A NuGen spokesman said today: "NuGen will continue to work alongside our technology supplier, Westinghouse, and our shareholders, Toshiba and Engie, in taking forward the Moorside development phase.
"NuGen will continue in a 'business as usual' manner, working in collaboration to gain the appropriate permits and licences required to construct Europe's largest nuclear new build project, and will continue to increase value and attractiveness of the project to potential future investors, as we have always done."
NuGen separately announced today it no longer intends to submit a Development Consent Order application in the second quarter of this year.
The company spokesman said this was due to the high number of submissions received during the second stage of public consultation it had held on plans for the Moorside project that ended in July 2016.
"The extent of the changes to our proposals will determine to what degree the timeline for submission will change," the company said.
NuGen said its "ongoing evaluation" would take several months to complete, "followed by further dialogue to discuss any revisions".
"If there are any changes, which are outside the scope of NuGen's previous consultations, we will follow due process and engage with our stakeholders on these changes. More importantly, NuGen is taking full advantage of this opportunity to evaluate its design choices in parallel with the feedback from the second stage of its public consultation to make sure the project can be delivered in the best way for Cumbria."
The NuGen spokesman said the reference to design choices "has nothing to do with" the reactor design.
Researched and written
by World Nuclear News