Executives at ailing conglomerate Toshiba have asked banks for additional support. Three main lenders say they are considering providing new lines of credit.
Toshiba executives met with representatives of about 80 financial institutions on Tuesday. They are believed to have discussed the temporary swell in the company’s losses following the bankruptcy of its US nuclear subsidiary Westinghouse.
The firm plans to spin off its mainstay flash memory chip operation. But it will be some time before it sees any gains from selling a majority stake in the new entity.
Toshiba said it needs to secure more than 6.3 billion dollars in fiscal 2017.
Sumitomo Mitsui Banking Corporation and 2 other main creditor banks proposed additional support on the condition that Toshiba offers shares in the spin-off company as collateral.
The electronics maker has postponed the release of its earnings report twice because it needed to investigate accounting practices at Westinghouse.
It is trying to release the report by Tuesday of next week.
JAPANESE corporate giant Toshiba has announced that its Westinghouse nuclear power unit has filed for Chapter 11 bankruptcy in the US, largely due to massive cost overruns for four reactor projects the company is building in South Carolina and Georgia. The financial loss to Toshiba is estimated to be about 1 trillion yen (about $9 billion) for the fiscal year that ended yesterday (March 31), which would be one of, if not the biggest, annual loss in Japanese corporate history.
Officials at both W estinghouse and parent company Toshiba are optimistic that the collapse is not total; the financial problems are rooted in Westinghouse’s construction division, while its nuclear fuel and plant operations/maintenance segments remain relatively profitable. On the other hand, the bankruptcy filing is glaring evidence that these same people have been very wrong before; every other objective indicator suggests that Westinghouse’s fall may be a fatal blow to what nuclear advocates were hoping would be a bit of a renaissance for nuclear power worldwide.
The Westinghouse Electric Company LLC is a remnant of the fabled US corporate giant Westinghouse, which was founded in 1886. Through the mid-1990s the original company was gradually broken up and sold off; the brand is still well known worldwide – mainly in household appliances and certain kinds of industrial equipment – but is owned and produced by a variety of unrelated parent companies. The nuclear power business has historically been one of Westinghouse’s strengths, and reached its zenith during the 1970s; a majority of the several dozen operating nuclear reactors in the US were built by Westinghouse, and it built reactors in several other countries. The mothballed Bataan Nuclear Power Plant (BNPP) here in the Philippines is a Westinghouse product.
The company has over the years become embroiled in controversy at times – the BNPP being one example – but on the whole remained fairly sound, and was considered a good investment when it was purchased in 1999 by British Nuclear Fuels Limited (BNFL). BNFL in turn sold Westinghouse to Toshiba in 2006 for $5.4 billion, just at a time when the prevailing view was that nuclear power was about to undergo a resurgence; China, the US and the UK were all then planning to invest heavily in new nuclear power facilities.
Toshiba thought they had a gold mine on their hands. Westinghouse had a new, marketable reactor design – the AP1000 – which had become the first Generation III+ design to receive final design approval from the US Nuclear Regulatory Commission (NRC) in 2004. The Japanese parent company sold 10 percent of its stake to the Kazakh national uranium company (Kazatomprom) in 2007 to secure a fuel source and strengthen its supply line, and in the same year won a bid from the China National Nuclear Corporation for construction of four AP1000 reactors and transfer of the AP1000 technology. In 2008, Westinghouse won a contract from Georgia Power Company to build two AP1000 reactors in that state and a second contract to build two more in South Carolina; two years later, the US government announced it would provide $8.3 billion in loan guarantees to complete the Georgia plant.
The Fukushima nuclear disaster in March 2011 and the boom in natural gas production in the US had a chilling effect on the plans for new nuclear plants in the US. Even without Fukushima raising safety concerns, nuclear plants suddenly became unreasonably expensive compared with gas-fired plants, which put a bit of pressure on Westinghouse. What really sank the company, however, was the enormous cost and schedule overruns at its Georgia and South Carolina projects. Both were expected to cost about $14 billion each, and be operational by the end of last year; so far, they have cost $19 billion and $22 billion, respectively, and are two years or more behind schedule.
To make matters worse, the financial trouble at Westinghouse has raised old, but still not completely answered, questions from regulators – in the US, the UK, and China – about the safety of the AP1000 reactors. Up to now, most of those concerns have been deflected, but what is likely to happen now, even if Westinghouse can continue to satisfactorily convince governments and potential operators of the system’s safety, is that uncertainty over whether the company – or more likely, whoever buys the ailing unit from Toshiba – can be relied on to keep up standards is going to make big customers look elsewhere. And once they do, they are likely to prefer the more economical and less contentious path countries like the US are taking, turning to gas generation or expanding renewables.
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.
The logo of Toshiba Corp. is seen at the company’s facility in Kawasaki, Kanagawa Prefecture, on Monday
Toshiba’s woes weigh heavily on government’s ambition to sell Japan’s nuclear technology
OSAKA – Toshiba’s announcement that it will write down nearly ¥712.5 billion in losses involving its U.S. nuclear unit, Westinghouse, is seen as a major setback for the government’s strategy of selling Japanese nuclear power technology abroad.
Over the past four years, Prime Minister Shinzo Abe, the Ministry of Economy, Trade, and Industry, and nuclear power players, such as Toshiba/Westinghouse, General Electric-Hitachi and Mitsubishi Heavy Industries, have promoted Japanese nuclear reactor technology worldwide.
Attempts to increase exports came even as concern within Japan grew over nuclear safety following a triple meltdown at the Fukushima No. 1 plant in the wake of the March 11, 2011 earthquake and tsunami. The efforts also came as questions were being raised about the total cost of nuclear power compared with other energy sources.
Japanese firms have attempted, with little success, to sell their technologies in countries as diverse as France, Vietnam, India, Turkey, Hungary, Poland, Slovakia, the Czech Republic and the United Arab Emirates. In June 2016, Toshiba said its goal was to win orders for 45 or more nuclear reactors overseas by 2030.
But Tuesday’s announcement by Toshiba came a few weeks after the company announced it would not take any new construction orders for nuclear reactors, and that it would focus instead on maintenance and decommissioning operations.
That decision effectively ended a decade-long effort by Toshiba, which began when it acquired a majority stake in Westinghouse in 2006, to make nuclear reactors a viable export business.
It follows greater than projected construction costs for four Westinghouse AP1000 next-generation nuclear reactors in the U.S. that have run billions of dollars over budget and are three years behind schedule. Original plans called for their startup around 2019 but that could be delayed.
Yoshimitsu Kobayashi, chairman of the Japan Association of Corporate Executives, told reporters at a regular news conference on Tuesday that promoting nuclear reactor exports was a necessary strategy, but one that needed to be reviewed.
“The nuclear power industry requires huge amounts of money for safety,” Kobayashi said.
“Given such high costs, we have to think about whether just one company can succeed. We have to keep strong technology in Japan, but we need to rethink how to create a union of private firms” in the nuclear business, he said.
But with Toshiba’s problems and the growing use worldwide of other, cheaper energy sources, including some renewables, anti-nuclear groups see an opportunity for Japan to change its basic policy.
“The Japanese government’s nuclear export policy was built on a combination of a poor understanding of the global energy market and self-delusion, said Shaun Burnie, a senior nuclear specialist at Greenpeace Germany who is currently based in Japan.
“The sooner the government and industry realize there is no future for nuclear power either domestically or in exports, the sooner they can concentrate on the energy technology of the future — renewables.”
The logo of Toshiba Corp. is seen at the company’s facility in Kawasaki, Kanagawa Prefecture, on Monday
VOX POPULI: Toshiba’s plight shows nuclear business is now a treacherous bet
What appears to be a lump of melted nuclear fuel is discernible in a photo, released late last month, of the interior of the crippled No. 2 reactor at the Fukushima No. 1 nuclear power plant.
The high radiation level inside the reactor would be lethal to humans so a small robot was expected to start inspecting the interior on Feb. 16. (The robot started inspection around 7:50 a.m.)
The robot is marked with the name TOSHIBA.
While leading the nation in the dismantling of nuclear reactors, Toshiba Corp. has aggressively pursued nuclear power plant construction overseas through its U.S. affiliate.
But on Feb. 14, the company announced a projected loss of 712.5 billion yen ($6.3 billion) in its nuclear business. To survive, Toshiba will have to sell off its profitable businesses piecemeal. To be sure, the company is in for massive restructuring.
The 2011 nuclear accident at the Fukushima plant was one of the indirect causes of Toshiba’s losses. Around the world, tighter regulations have been applied to nuclear power plants because of safety concerns, and Toshiba’s four nuclear plant construction projects in the United States became far more costly than anticipated.
The company has only itself to blame for underestimating the consequences of the Fukushima disaster.
I dropped in at the Toshiba Science Museum in Kawasaki, Kanagawa Prefecture, the other day. Its impressive array of exhibits included Japan’s first electric refrigerator, washing machine and vacuum cleaner. There was even a portable personal computer, said to be the first of its kind in the world.
Once a prestigious corporation that boasted cutting-edge technology, I wonder how long Toshiba’s decline will continue.
Overseas, Siemens AG of Germany withdrew from the nuclear business after the Fukushima accident, and France’s Areva SA is said to be struggling.
Toshiba’s massive losses remind us anew that the end is drawing near on the era of lucrative nuclear businesses.
A long, tough road lies ahead for the decommissioning of Fukushima’s nuclear reactors. I feel for Toshiba workers who are engaged in this task while their company languishes.
It will soon be six years since the Fukushima disaster. The days of having to confront the gravity of that accident are far from over.
Toshiba Corporation (aka Westinghouse) is withdrawing from the nuclear power construction business… Captains of Toshiba and Westinghouse are abandoning their nuclear Titanic sunk on economic iceberg!!!!!
Toshiba Corp. will cease taking orders related to the building of nuclear power stations, sources said Saturday, in a move that would effectively mark its withdrawal from the nuclear plant construction business.
The news comes amid reports Toshiba’s chairman may resign over the massive write-down that has doomed the company’s U.S. nuclear business.
The multinational conglomerate said Friday it will review its nuclear operations and spin off its chip business to raise funds in a bid to cover an expected asset impairment loss of up to ¥700 billion ($6.08 billion).
After Toshiba ceases taking new orders, it will focus on maintenance and decommissioning operations, according to the sources.
The company will continue work on four nuclear plants under construction in the United States that are expected to be completed by 2020.
The Japanese industrial conglomerate may announce company chairman Shigenori Shiga’s resignation as soon as Feb. 14, when it reports its April-December financial results, the sources also said.
Shiga once served as president of the U.S. nuclear unit, Westinghouse Electric Co., which Toshiba has said could face a multibillion-dollar loss due to cost overruns from delays in plant projects.
The post of Toshiba chairman is expected to remain vacant after Shiga’s resignation.
Westinghouse Chairman Danny Roderick is also set to step down, the sources said, but Toshiba President Satoshi Tsunakawa is likely to stay on.
Shiga, Roderick and Tsunakawa took their current posts last June as Toshiba reshuffled its management following an accounting scandal that surfaced in 2015.
Shiga was the vice president in charge of the power systems business when Westinghouse acquired CB&I Stone & Webster in late 2015. CB&I Stone & Webster is the U.S. nuclear plant construction firm at the heart of Toshiba’s massive write-down problem.
Toshiba to sell part of chip business, puts overseas nuclear ops under review
Toshiba Corp (6502.T) said it will sell a minority stake in its memory chip business as it urgently seeks funds to offset an imminent multi-billion dollar writedown, adding that its overseas nuclear division – the cause of its woes – was now under review.
The drastic measures are set to be just some of the tough choices the Japanese conglomerate will have to take as proceeds from the sale are likely to only cover part of a charge that domestic media has put at $6 billion.
Still battered by a 2015 accounting scandal, Toshiba was plunged back into crisis when it emerged late last year that it had to account for huge cost overruns at a U.S. power plant construction business recently acquired by its Westinghouse division.
Describing the nuclear division as no longer a central business focus for the firm, Chief Executive Satoshi Tsunakawa said Toshiba will review Westinghouse’s role in new projects and whether it will embark on new power plant construction. The division will also now fall under direct CEO supervision.
Tsunakawa added Toshiba was looking to sell less than 20 percent of its memory chip business – the world’s biggest NAND flash memory producer after Samsung Electronics (005930.KS) – which comprises the bulk of the conglomerate’s operating profit.
The firm is rushing to complete the sale by the end of the financial year in March as failure to do so will likely mean that shareholder equity – just $3 billion in the wake of the accounting scandal – would be wiped out by the charge.
Sources have said Toshiba aims to raise more than 200 billion yen ($1.7 billion) from the sale and potential investors include private equity firms, business partner Western Digital Corp (WDC.O) and the government-backed Development Bank of Japan.
It is also selling other assets although it ruled out the sales of any of its infrastructure businesses – which include water treatment, railway and elevator firms.
“We’ve been raising funds through sales of stock holdings, real estate and other assets,” Tsunakawa told a news conference without disclosing the amount, adding that various measures were being considered to boost the firm’s capital base by March.
Toshiba also said it may eventually list the memory chip business.
METI proposed that TEPCO would start a subsidiary to manage all its nuclear plants. Saying it would facilitate restarting the reactors at the Kashiwazaki Kariwa NPP, as since the beginning of the Tepco-owned Fukushima Daiichi nuclear plant disaster the government planned to use profits from the Tepco-owned Kashiwazaki-Kariwa NPP to finance the Fukushima Daiichi disaster costs; and that it would also encourage collaboration among other utilities nuclear power plants, and make merger or sale easier. METI thinks such change would also encourage the public to support nuclear reactors restarting.
As the total decommissionning costs could double, Tepco would also like the rules to be changed so as not take an added large loss on their books.
One day later Hitachi announced that they consider merging their nuclear business with Toshiba and Mistubishi.
These recent new developments show Japan nuclear industry on the defensive, former PM Koizumi warned the Liberal Democratic Party could lose the next election if it focuses on the nuclear power issue.