Vogtle and VC Summer at Risk as Westinghouse Files for Bankruptcy

  • bustThe firm filed for Chapter 11 protection and secured an $800 million bridge loan to fund operations
  • Southern’s CEO is furious saying firm’s parent, Toshiba, is not talking to its most important customers
  • Scana’s CEO will decide whether to abandon V C Summer in whole or part
  • UK Approves AP1000 reactor design for Moorside project

Westinghouse Electric Company, LLC has filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. The Company is seeking to a “strategic restructuring” as a result of overwhelming financial and construction challenges in its U.S. AP1000 power plant projects in Georgia and South Carolina.  Just recently the firm engaged in a realignment of its top executives in anticipation of the Chapter 11 action.

Westinghouse 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 reorganization. The bankruptcy court said, in approving the loan, that it would monitor expenditures to insure that none of the funds are diverted to other Toshiba business units. The Chapter 11 filings took place in the U.S. Bankruptcy Court for the Southern District of New York in New York City.

Toshiba’s self-inflicted troubles, caused by cooking the books, over stating earnings by $1.6 billion, and mismanagement of its major acquisitions in the US nuclear sector, have impacted projects in the U.S., the U.K., and India. The firm said it would exit the nuclear business worldwide. See this “”Reuters Factbox” for a deep dive into the details of the pending reorganization of Westinghouse.

Westinghouse said operations in its Asia and Europe, the Middle East and Africa (EMEA) Regions are not impacted by the Chapter 11 filings.

This statement was greeted by deep skepticism in the UK where the Moorside project, expected to involve construction of three AP1000 reactors, was to be funded by a 60% equity stake by Toshiba. That commitment has now gone up in smoke. In its place the project’s backers are calling for the UK government itself to fund it.

Meanwhile, in India the government of PM Narendra Modi issued a series of statements saying that it is continuing “negotiations” with Westinghouse for construction of six AP1000s at a coastal site in the southern state of Andhra Pradesh. The power station was moved there after opposition in Modi’s home state of Gujarat forced him to abandon that site.

The viability of the project has never been particularly firm since there has been little progress on either the financing nor the lifting of the conditions of the draconian supplier liability law. Toshiba’s global financial collapse will do nothing to advance plans for the India project.

Separately, Westinghouse says it remains committed to its existing projects in China which are unaffected by the US bankruptcy court filing. Four reactors there are nearing completion with more planned though Westinghouse is expected to shift be a supplier of components rather than function as both a vendor and EPC manager for the projects.

Back in the U.S. Westinghouse executive issued the usual platitudes aimed at Wall Street about their drastic action.

“Today, we have taken action to put Westinghouse on a path to resolve our AP1000 financial challenges while protecting our core businesses,” said Interim President & CEO José Emeterio Gutiérrez.

“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.”

He added that the DIP financing will fund Westinghouse’s core businesses of supporting operating plants, nuclear fuel and components manufacturing and engineering as well as decommissioning, decontamination, remediation and waste management.

The company said has reached an agreement with each owner of the U.S. AP1000 projects to continue these projects during an initial assessment period of 30 days. The implied commitment of continued work beyond the next 30 days is not supported by the actions and statements of the CEO’s of the two lead US utilities involved in the projects.

The CEO’s of the Vogtle and V C Summer projects expressed strong skepticism about these statements. Southern’s CEO flew to Japan to confront Toshiba’s management about their business strategy. Scana’s CEO said the firm was evaluating “all options” which include abandoning one or both reactor projects.

The public utility commissions in Georgia and South Carolina are sure to face angry rate payers who have forked over several billion dollars so far and are now facing the prospects that the reactors may never being finished.

A Major Blow to the Nuclear Industry

The Washington Post reported March 28 that the bankruptcy filing “is a blow to the nuclear power industry.”  Along with just about everyone else following the story,  the newspaper asked whether the projects in Georgia and South Carolina would be completed and whether there would ever be a new, full scale reactor construction start in the U.S.

The Post pointed out that the bankruptcy filing will trigger a tsunami of legal questions  over whether Toshiba will accept responsibility for cost overruns at Westinghouse and if so how much. The number one question is whether the utilities that own the reactors under construction will have to cover most of the increased costs of completing them. That could mean higher rates for consumers in those areas.

Given that Toshiba has missed three deadlines to file statements about its financial conditions, the question that hangs in the air with the heaviness of a pending summer thunderstorm is whether Toshiba is still a “going concern” or whether it is is out of cash. There are no indications the Japanese government plans to intervene in the ongoing financial crisis.

In seeking protection under Chapter 11 of the bankruptcy act, Westinghouse could still finish building those plants. The EPC firms working for Westinghouse might wind up having the utilities themselves as their customers.

Southern Co. subsidiary Georgia Power, one of the co-owners of the Vogtle reactors, told the Post that it has been preparing for a Westinghouse bankruptcy and that it was “working with Westinghouse to maintain momentum at the site.”

It said it is still assessing the impact of the bankruptcy and will consult with the Georgia Public Service Commission and its partners “to determine the best path forward.” It added that it would seek to hold Toshiba and Westinghouse accountable.

In a harshly worded editorial, which will surely be read by members of congress, the Post called the filing, “a bankruptcy that’s bad news for climate policy.”

The paper added, “If the United States lacks a robust nuclear industry, it may be less capable of influencing international policy on issues ranging from reactor safety to weapons proliferation. Maintaining a solvent, innovative nuclear industry would serve national security as well as the environment.”

Southern CEO Flies to Tokyo to Look Toshiba CEO in the Eye

According to the Bloomberg wire service, the head of U.S. utility-owner Southern Co. says he flew to Tokyo for one primary reason: “To look the CEO of Toshiba in the eye” and remind him of the company’s “moral commitment” to getting a nuclear project in Georgia done. Note that moral commitments are not usually upheld in bankruptcy courts. What CEO Fanning is really saying is that as he sees it Toshiba’s failure could affect bilateral relations between Japan and the US.

In a Bloomberg Television interview, Southern CEO Thomas Fanning said he needed to meet Toshiba Corp. CEO Satoshi Tsunakawa “business person-to-business person” to hammer out a plan on getting two nuclear reactors finished at its Vogtle plant after years of delays and billions in cost overruns. Both Vogtle units are scheduled to be complete by 2020, but that date is subject to change based on how Toshiba handles the Westinghouse bankruptcy.

Scana Chief Executive Officer Kevin Marsh told investors in a call that the company would continue with the construction of its own two reactors at the V.C. Summer plant in South Carolina while considering all options.

Bloomberg reported that Ashar Khan of Visium Asset Management LP asked why it wouldn’t make sense for Scana to just abandon the project? Marsh called it the “least preferred option.”

Walking away from the V.C. Summer project would mean failing to meet the commitment Scana made to state regulators “to provide for the needs of South Carolina for the next 60 years,” Marsh said. “So we’ve got to do the evaluation” of all options, he said.

Stan Wise, chairman of Georgia’s public service commission, told the Bloomberg wire service that the agency is still “most interested” in seeing the reactors completed and believes Southern has “appropriate levels of parental guarantees” from Toshiba to finish them.

Scana to Evaluate Summer options

(WNN) Scana Corporation is considering whether to complete or abandon one or both of the Summer AP1000 units. Two of those units – Summer 2 and 3 – are being built for Scana subsidiary South Carolina Electricity and Gas (SCE&G) and co-owner Santee Cooper.

Marsh said Westinghouse had provided Scana with an estimate of the additional cost of completing the project, beyond that already provided under existing agreements. He said Scana would review the estimate, but that it expects resources from Westinghouse and Toshiba – including a so-called parental guarantee from Toshiba – to be adequate to compensate Scana for the additional costs.

Marsh said the company must evaluate all the options open to it before arriving at a decision as to whether to continue or abandon one or both reactor projects. He said his preferred option would be to complete the project.

“We are building these plants because we needed generation for our service territory. We were looking for a long-term clean energy solution, which these plants provide … If we just cancel these plants we still have a generation issue we need to face,” he said.

“Our commitment is still to try to finish these plants – that would be my preferred option before going through the evaluation. The least preferred option, realistically, is abandonment,” he said.

Marsh confirmed that Scana worked with Southern on the interim agreement, and that the companies were communicating with each other with the consent of Westinghouse and Tohsiba. He said both companies had an interest in completing their projects, but noted that the contracts for the projects are different.

Westinghouse Achieves U.K. Regulatory Confirmation of AP1000® Plant Design

Westinghouse Electric Company announced this week that its AP1000 nuclear power plant design has successfully completed review by regulators in the United Kingdom, who concluded their Generic Design Assessment (GDA) by issuing Design Acceptance Confirmation (DAC) and Statement of Design Acceptability (SoDA) for the Westinghouse technology. The DAC and SoDA were issued by the Office for Nuclear Regulation (ONR) and the Environment Agency (EA), respectively.

The successful completion of this rigorous review by the ONR and the EA has been costly and many years in the making. Over the years the ONR has sent Westinghouse back to square one in the process over what it said was inadequate documentation and level of detail in its submission. Since then, Westinghouse has provided detailed technical information to address and resolve regulators’ questions.

This time the decision by ONR represents a major milestone related to the Moorside Project,” said José Emeterio Gutiérrez, interim president and chief executive officer.

The Moorside Project, developed by NuGeneration Ltd., is planed to consist of three AP1000 units at West Cumbria in North West England. The project is designed to help secure the U.K.’s future energy supply by delivering affordable, low-carbon electricity as part of a balanced energy mix.

The three units planned at Moorside would benefit from Westinghouse’s experience on the world’s first eight AP1000 units, which are currently being delivered at four sites in the United States and China. Two units each are in the final stages of completion at the Sanmen and Haiyang sites in China, with an additional two units each under construction at the V.C. Summer and Vogtle sites in the U.S.

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