Westinghouse Enters Reorganization

by Will Davis

Westinghouse Electric announced very early this morning that it had filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy code, according to an official press release.  This event quickly follows the wide reporting yesterday evening that Toshiba’s board of directors had voted to approve the declaration of bankruptcy by Westinghouse, which is Toshiba’s subsidiary.  News releases from the various concerned parties are out this morning in response, and we have our first glimpse of how this process might affect the Westinghouse AP1000 plants under construction at V. C. Summer (owned by SCANA, SCE&G and Santee Cooper) and at Plant Vogtle (whose majority owner is Georgia Power, a subsidiary of Southern Company).

Westinghouse Files Chapter 11

In the announcement made this morning, Westinghouse stated that it had secured $800 million in debtor-in-possession financing “from a third-party lender to help fund and protect its core businesses during its reorganization.”

Westinghouse interim President and CEO Jose Emeterio Gutierrez was quoted in the release as saying “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 reorganization to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader.”

According to the release, Westinghouse has reached agreements with the owners of the US AP1000 nuclear plant construction projects “to continue these projects during an initial assessment period.”  The company says it remains committed to the AP1000 and that it “will continue its existing projects in China as well as pursuit of other potential projects in the future.”  The company notes that its operations in overseas areas are not impacted by the Chapter 11 filing.

AP1000 Plant Owners Comment

No news releases were available from the owners of the Vogtle site at press time, but SCANA, one of the owners of the V. C. Summer plant in South Carolina, issued a press release early this morning.

In its release, SCANA stated that it and Santee Cooper “have been working with WEC (Westinghouse Electric) 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.”  The company went on to say that agreements filed today, along with Westinghouse’s petition for Chapter 11 protection, “allow for a transition and evaluation period during which SCANA and Santee Cooper will assess information provided by WEC and determine the most prudent path forward for the project.”

It was not mentioned in the press release, but it should be noted that SCANA has obtained access to the AP1000 intellectual property as one of its prior arrangements, specifically to allow completion of the new Summer units even if Westinghouse were to completely exit.

Analysis during this evaluation period will benefit from increased availability of information inside Westinghouse about the project.  According to Santee Cooper President and CEO Lonnie Carter, “This agreement 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.”

Construction management for the time being continues under Fluor Corporation. Fluor was brought in at the time Westinghouse bought Shaw Group / Stone & Webster from Chicago Bridge and Iron, and merged the long-standing architect-engineer / constructor firm into a wholly-owned subsidiary called WECTEC.  In SCANA’s press release, Fluor Chairman and CEO David Seaton said, “Fluor will continue to support SCANA, Santee Cooper and Westinghouse on the V. C. Summer project as the parties work through the current situation.  We remain committed to the successful completion of this important project.”

SCANA will hold an investor call today at 3 p.m. EDT to further discuss the impact of Westinghouse’s Chapter 11 filing on the project underway at V. C. Summer.

Toshiba Weighs In

In an extensive release, Westinghouse parent Toshiba Corporation observed that the bankruptcy filings include not just Westinghouse Electric Company (WEC) but also Westinghouse’s U.S. subsidiaries and affiliates, and also Toshiba Nuclear Energy Holdings (UK) Limited [known as TNEH (UK) officially], which is a holding company for Westinghouse Group operating companies outside the U.S.

Toshiba stated, “WEC Group companies will continue ordinary business operations, in anticipation of reorganizing their business lines under Chapter 11.”  The company also wrote, “Toshiba and the WEC Group are working cooperatively with the owners of the two sites where WEC is constructing nuclear power plants to develop arrangements for the continuation of construction during an interim period. 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.”

Toshiba also noted, “in respect to the Fiscal Year 2016 business results, despite the steady growth in (nuclear) fuel and (nuclear power plant) services businesses, WEC Group was expecting to book a large loss accruing from a $6.1 billion write down for cost overruns at U.S. Nuclear projects.”

What Happens Now

Westinghouse and the owners of the Summer and Vogtle nuclear plant construction projects will now enter a period of investigation and analysis, with the owners having, as stated, “much improved access to information inside Westinghouse on the projects’ status, progress and cost.” Work is expected to continue normally on the sites, and the continuity of Fluor as construction manager (who is not affected by or included in any of these Chapter 11 proceedings, being a fully separate company) as announced this morning is good news. More details will emerge over the next several days as to what the various contingency plans of the plant owners constitute, likely even up to the point of having to complete the nuclear plants themselves. This would be a turn of events the owners surely do not wish to have to take, but for which they quite sensibly would prepare for out of an abundance of caution.

As background…  Back in 2012, when Shaw Group executed a “put option” on Westinghouse stock (selling it to Toshiba) it was stated by Toshiba that it and Westinghouse “were free to pursue other partners” for engineering and construction on other (future) nuclear plant projects. While it is true that no reactor vendor has ever declared bankruptcy in the middle of a nuclear plant construction project, it is also true that architect-engineers and construction managers have been replaced more than once while plant construction was well underway but before engineering was anywhere near completion.  As one example, the Mexican utility CFE fired the original architect-engineer for its Laguna Verde nuclear plant mid-project replacing it with EBASCO as engineer on Unit 1 and with the utility electing to act as engineer on Unit 2. CFE itself acted throughout as construction manager on both units. There are other examples as well, in the U.S.

For now, Toshiba, Westinghouse, very importantly Fluor, and at least one set of owners of new AP1000 nuclear plants under construction have clearly expressed commitment to see the projects through.  It remains to be seen what arrangements will be made or changed to support this process, some of which can be expected to be announced in the next few days or weeks.


 

ANS member Will DavisWill Davis is a member of the Board of Directors for the N/S Savannah Association, Inc. He is a consultant to the Global America Business Institute, a contributing author for Fuel Cycle Week, and he writes his own popular blog Atomic Power Review. Davis is also a consultant and writer for the American Nuclear Society, and serves on the ANS Communications Committee and on the Book Publishing Committee. He is a former U.S. Navy reactor operator and served on SSBN-641, USS Simon Bolivar.

6 thoughts on “Westinghouse Enters Reorganization

  1. Adolfo F. Ponce de Leon PE

    Great professional article.
    Thanks.
    Iam the owner and writer of scope and enforcer of contracts.
    Fluor have very good enginers.
    Worked with them on the Oak grove facility.
    Modifications with Sc facility power plant.
    Thanks.

  2. Will Davis

    I am optimistic only because the owners themselves have stated that their priority is to complete these plants, whose output is required and upon whose construction considerable monies have already been spent. What I am actually seeing is a hard line in the press that centers on abandonment — largely because that would be the most catastrophic outcome that the general press can conceive of, therefore it gets the copy in order to stir up views. According to SCANA, there is sufficient money available between the Westinghouse assets and the parental guarantee from Toshiba to complete the V.C. Summer nuclear plant expansion, and since they can see all the numbers that we cannot I have to believe them for now.

  3. David Dixon

    I hope we will get more details in the coming weeks and months about what went wrong. The four AP1000 units were supposed to have reduced cost and schedule risk because ‘every one’ had learned from their experiences in Korea and Japan how to do this right. Note, that was also the theory in Taiwan and it didn’t work there either. Again, what went wrong?

  4. Ivan Grosz

    Will you are a wonderful guy, but aren’t you a bit too optimistic when it comes to the future of these four plants? The missing moneys, as we know, are quite substantial.
    I happen to be the person who conducted the EBASCO Mechanical – Nuclear Design Review for Laguna Verde 1. Those were better days.