Where Toshiba’s $10bn nuclear debt came from: the Vogtle AP1000 construction site in Georgia, under inspection by NRC Commissioner Svinicki.
Toshiba’s nuclear flagship goes bust after $10 billion losses
News that one of the world’s biggest nuclear power constructors, Westinghouse, has filed for bankruptcy in with debts of over $10 billion has put the entire sector on notice and issued a dire warning to nuclear investors everywhere, writes Jim Green. Among the likely casualties: the UK’s Moorside nuclear complex in Cumbria.
The rapidly-evolving nuclear power crisis escalated dramatically yesterday when US nuclear giant Westinghouse, a subsidiary of Japanese conglomerate Toshiba, filed for bankruptcy.
The Chapter 11 filing took place in the US Bankruptcy Court for the Southern District of New York in New York City.
Westinghouse and its parent Toshiba are in crisis because of massive cost overruns building four ‘AP1000’ nuclear power reactors in the southern US states of Georgia and South Carolina.
The combined cost overruns for the four reactors now amount to about $1.2 billion and counting. And it has now emerged that they may never be finished at all. Whether the four reactors will be completed is now subject to an “assessment period”, according to Westinghouse.
The corporate mishap may also signal the end of new nuclear power in the US. No other reactors are under construction in the country and there is no likelihood of any new reactors in the foreseeable future. The US reactor fleet is one of the oldest in the world, with 44 out of its 99 reactors having been operated for four decades or more.
A $10 billion financial hole – and it’s getting deeper!
Toshiba says Westinghouse had debts totalling US$9.8 billion. Plans for new Westinghouse reactors in India, the UK and China are in jeopardy and will likely be cancelled. Bloomberg noted yesterday: “Westinghouse Electric Co., once synonymous with America’s industrial might, wagered its future on nuclear power – and lost.”
The same could be said about Toshiba, which is selling profitable businesses to stave off bankruptcy. Toshiba said yesterday it expects to book a net loss of $9.1 billion for the current fiscal year, which ends on Friday – a record loss for a Japanese manufacturer.
That projected loss is also well over double the estimate provided just last month, raising investor fears that the final figure may be greater still. “Every time they put out an estimate, the loss gets bigger and bigger”, said Zuhair Khan, an analyst at Jefferies in Tokyo. “I don’t think this is the last cockroach we have seen coming out of Toshiba.”
The BBC noted that Toshiba’s share-price has been in freefall, losing more than 60% since the company first unveiled the problems in December 2016. Toshiba president Satoshi Tsunakawa said at a news conference yesterday: “We have all but completely pulled out of the nuclear business overseas.”
Westinghouse is the major member of the Nugen consortium that’s set to build a massive three-reactor AP1000 nuclear complex at Moorside in the UK, next to the Sellafield site. The company has already stated that while it intends to progress the project through planning stages, it is unable to take on financing or construction and intends to sell its share.
Nugen’s other member, the French energy company Engie (formerly GDF Suez) has also gone on record as wanting to extricate itself from the Moorside project in favour of the ‘new energy’ economy based on renewable, storage and smart grid technologies.
It’s now looking increasingly probable that the Moorside project, given the state of the Nugen consortium and the massive failure of the AP1000 design, may never progress to construction.
The good news for the nuclear industry? The UK’s Office of Nuclear Regulation (ONR) today – with impeccable timing – accepted the AP1000 design as “suitable for construction in the UK“ and issued Westinghouse a Design Acceptance Certificate.
Is the nuclear game up at last?
A similar crisis is unfolding in France, which has 58 power reactors but just one under construction. French ‘EPR’ reactors under construction in France (Flamanville) and Finland are three times over budget – the combined cost overruns for the two reactors amount to about €12.7 billion and counting.
The French government is selling assets so it can prop up its heavily indebted nuclear utilities Areva and EDF. The French nuclear industry is in its “worst situation ever” according to former EDF director Gérard Magnin.
Meanwhile a simple comparison of decommissioning provision between France and Germany indicates that EDF has massively under-budgetted for its liabilities. Germany has set aside €38 billion to decommission its 17 nuclear reactors (€2.2 billion each), but France has set aside only €23 billion to decommission its 58 reactors (€0.4 billion each).
When the real costs, for which EDF will be liable, come in, they could easily bankrupt the company. This in turn puts the UK’s Hinkley Point double EPR nuclear project, in which EDF is the main partner, in doubt.
The crisis-ridden US, French and Japanese nuclear industries account for half of worldwide nuclear power generation. Other countries with crisis-ridden nuclear programs or nuclear phase-out policies account for more than half of worldwide nuclear power generation.
Meranwhile renewable energy generation doubled over the past decade and strong growth, driven by sharp cost decreases, will continue for the foreseeable future.
Toshiba’s nuclear unit files for bankruptcy, 1 tril. yen loss eyed
TOKYO (Kyodo) — Toshiba Corp. said Wednesday its troubled U.S. nuclear unit Westinghouse Electric Co. has filed for Chapter 11 and it could post a net loss of over 1 trillion yen, the biggest ever for a Japanese manufacturer.
Westinghouse filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, as the Japanese parent company was rushing to limit further losses from the U.S. unit and looking to exit the money-losing overseas nuclear business.
With the do-or-die decision on the filing, Toshiba will make all-out efforts to move out of its financial woes, Toshiba President Satoshi Tsunakawa told a press conference in Tokyo after Westinghouse filed for bankruptcy.
“We are almost risk-free as we are pulling out of overseas nuclear operations, the biggest problem,” he said.
Toshiba said it could post a group net loss of 1.01 trillion yen ($9.13 billion) for the fiscal year ending on Friday, with massive costs related to the Chapter 11 filing. Westinghouse has $9.8 billion in total liabilities, much of which must be shouldered by Toshiba under a debt guarantee for the U.S. unit.
The estimated net loss would eclipse 787.3 billion yen posted by Hitachi Ltd. in the year to March 2009 following the 2008 global financial crisis and would be much worse than the 390 billion yen loss the company projected in February.
The huge loss would put the company in a negative net worth of 620 billion yen at the end of March, Toshiba said, far larger than the 150 billion yen it previously estimated.
Tsunakawa said that he feels responsibility for the company’s crisis but has no intention to step down as chief executive.
He took the helm at the company last June after it had been hit by an accounting scandal in 2015.
The bankruptcy filing will deconsolidate Westinghouse from Toshiba’s financial results for the current fiscal year.
The company has been under pressure to have Westinghouse file for bankruptcy protection, as the unit is the main cause of its massive losses with delays in U.S. plant projects leading to cost overruns, informed sources have said.
The nuclear-to-electronics conglomerate was looking to finalize losses related to the unit within the current fiscal year through the bankruptcy filing.
In February, Toshiba said it was expecting a loss of 712.5 billion yen in its U.S. nuclear business for the nine months through December on an unaudited basis. The company had to delay its earnings announcement twice, saying it needed more time to look into an accounting problem at Westinghouse.
Faced with ballooning losses, Toshiba had been considering a way to separate itself from the debacle at Westinghouse, which it bought in 2006 as a step to tap into overseas markets.
The cash-strapped company has decided to spin off its prized memory chip business and sell a majority stake, or even the whole operation, to raise funds to bolster its financial standing.
Toshiba closed the first round of bids Wednesday for the new semiconductor division that it plans to establish on Saturday. It has likely attracted 10 bidders and will choose the preferred buyer in May, according to sources close to the matter.
Tsunakawa is confident that the bidders have a strong financial standing and the proceeds from the sale will be able to eliminate the company’s liabilities.
He estimates the value of the chip business at 2 trillion yen at least, and said he expects the value to continue to rise.
Toshiba is seeking support from Korea Electric Power Corp. as a sponsor, aiming to sell its Westinghouse shares to the South Korean utility.
“We are focused on developing a plan of reorganization to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader,” Westinghouse Interim President and Chief Executive Officer Jose Emeterio Gutierrez said in a release.
The company turned the corner in stemming the bleeding for the time being. But the fate of its turnaround remains unclear.
The sale of Westinghouse and the pullout of the overseas nuclear business will leave the company with no core profit-making businesses after it sold its cash-cow medical business and as it plans to sell its chip operation.
The outlook for the sale of the U.S. unit is far from certain. Toshiba may find it difficult to attract a buyer with slowing demand for nuclear power generation after the 2011 Fukushima nuclear crisis.