By David Pendered
The bankruptcy papers Westinghouse filed today in regards to Plant Vogtle names the nuclear plant in Georgia as one of two reasons the company faces a dire financial situation. The other reason is a nuclear power plant in South Carolina.
The papers filed by Westinghouse Electric Corp. LLC don’t waste words before laying the blame on losses in nuclear plant construction.
The papers contend most of Westinghouse’s core businesses are, “very profitable.” These profitable endeavors will be used to show the overall company is viable.
Westinghouse’s one trouble spot is the construction of nuclear power plants, the papers contend:
- “The debtors [Westinghouse] will … reorganize around their profitable Core Businesses and isolate them from the one specific area of their businesses that is losing money: their construction of nuclear power plants in Georgia and South Carolina.”
Reuters reported Tuesday that electric bills could rise higher than expected in the two states as a result of the bankruptcy filing. Reuters quoted Stan Wise, chairman of the state’s utilities regulator, Georgia Public Service Commission (PSC):
- “We’re getting briefings about what we’re facing and at this point I don’t think any of the options are terrific.”
The delays and cost overruns at the two plants resulted in Westinghouse’s majority owner, Toshiba Corp., reporting Feb. 14 that it expects to incur a $6.1 billion loss related to the two plants.
The bankruptcy papers indicate that Westinghouse might seek to pull out of the two plants – Vogtle, near Waynesboro, and V.C. Summer, located about 20 miles northwest of Columbia, S.C.:
- “The ultimate resolution of the Debtors’ [Westinghouse’s] involvement in these projects remains uncertain, but the Debtors’ chapter 11 cases will remove the threat that the construction cost increases pose to the Debtors’ ability to operate their Core Businesses.”
However, the majority owner of Westinghouse, Toshiba Corp., has indicated its intent to complete the projects, according to a Feb. 17 sector comment from Moody’s Investors Service.
Evidently, Toshiba can’t afford for Westinghouse to walk away. Construction delays and cost overruns have created a series of challenges that:
- “[P]otentially expose the Debtors to billions of dollars either in (i) cost overruns to complete the projects or (ii) penalties and liabilities if they abandon the projects. The Debtors cannot afford either option. Notwithstanding that the Debtors’ other businesses are profitable and world-class, the Construction Business cost increases have led to a liquidity crisis that the Debtors can only solve in chapter 11.”
The intent to complete the two plants is good news for their owners, Georgia Power and South Carolina Electric and Gas Co.
After Toshiba reported Feb. 14 that it expected to incur losses of $6.1 billion due to cost overruns at the two plants under construction, Moody’s noted on Feb. 17 that:
- “We view Toshiba’s stated commitment to complete the two US nuclear projects, despite intentions to stop constructing new nuclear plants elsewhere overseas, as credit positive for the utility partners.”
On Wednesday, Michael Haggarty, an associate managing director at Moody’s, issued the following statement:
- “Westinghouse’s Chapter 11 bankruptcy filing and Toshiba’s ongoing financial weakness have raised new questions over their ability and willingness to complete the Summer and Vogtle nuclear projects under the terms of the fixed price contracts, placing additional financial pressure on the project owners [see below].
- “Our negative outlooks for these entities incorporated our expectation that a Westinghouse bankruptcy filing could occur, and reflect the likelihood that the projects won’t be completed under the current time and cost arrangements. We anticipate the project owners will evaluate alternatives for finishing construction, which in all likelihood would result in higher risk and additional costs.”
Issuers with ownership stakes and their Moody’s credit rating include:
VC Summer Nuclear Generating Station Units 2 and 3
- South Carolina Electric & Gas (Baa2 negative)
- South Carolina Public Service Authority (A1 negative)
- SCANA Corporation (Baa3 negative)
Vogtle Electric Generating Plant Units 3 and 4
- Georgia Power (A3 negative)
- Oglethorpe Power (Baa1 negative)
- MEAG (Power Project J – A2 negative; Power Project M – A2 negative; Power Project P – Baa1 negative)
- City of Dalton, GA (General Obligation – Aa2; Combined Utility Entity – A2)
The bankruptcy papers also point to the global scope of the atomic energy industry.
Westinghouse technology is present in about half the world’s commercial nuclear reactors.
Westinghouse ownership includes Toshiba Corp. (87 percent); Japanese conglomerate IHI Corp. (3 percent); and Kazakhstan’s National Atomic Company, Kazatomprom JSC, owns the remaining 10 percent according to the bankruptcy papers.
Westinghouse filed the papers in the Bankruptcy of the Southern District of New York.