The American Aftershocks From A Potential Westinghouse Bankruptcy

Struggling Japanese conglomerate Toshiba Corp (USA) TOSYY TOSBF, facing losses of $6.3 billion on its nuclear business, may bring its American subsidiary Westinghouse Electric Co. into Chapter 11 bankruptcy, according to multiple reports.

Toshiba’s financial crisis is largely traceable to Westinghouse’s December purchase of the nuclear construction business Stone & Webster. Toshiba chairman Shigenori Shiga stepped down from his position earlier this month after the company’s multi-billion-dollar write-down was announced.

Related Link: SCANA Corp Hit By Toshiba's $6 Billion Writedown Catastrophe

A Westinghouse bankruptcy could be viewed by some investors as “a sign that further losses will be limited,” according to the Nikkei Asian Review, which noted that Toshiba stock climbed 12 percent Friday morning.

Toshiba, which missed a scheduled financial reporting date on Valentine’s Day, is set to propose a spinoff of its profitable memory chip business at a March 30 shareholder meeting, according to the Japan Times. If the spinoff is approved, Toshiba Memory Corp. would go online April 1.

American Stocks Exposed To Toshiba’s Nuclear Construction Projects

Westinghouse’s partners in nuclear power plant construction in the United States are SCANA Corporation SCG and Southern Co SO.

Westinghouse is overseeing construction at nuclear power plants in Georgia and South Carolina, but the projects are “years behind schedule and billions over budget,” according to Utility Dive, a trade publication for the utility sector.

Westinghouse and Toshiba have committed to the completion of the nuclear units under construction in South Carolina, although the completion date is now 2020, Scana said in a Feb. 14 statement.

“[Scana] will continue to monitor [Westinghouse’s] ability to adhere to the new schedule, as well as the financial condition of [Westinghouse] and Toshiba and its effect on their ability to complete the project,” the Cayce, South Carolina-based utility company said in the statement.

A spokesman for Southern Co. subsidiary Georgia Power said the company is monitoring Toshiba’s financial position, as the company is the guarantor for an engineering, procurement and construction agreement with the Georgia utility company.

“The EPC agreement continues to protect Georgia Power customers through its firm and fixed nature,” said spokesman Jacob Hawkins. The owners of a nuclear power project in Georgia possess $920 million in letters of credit per the EPC agreement, Hawkins said.

“The work we are seeing on the site is indicative of Westinghouse’s commitment to fulfilling their obligations under our contract.”

‘A Very Chilling Effect’

Toshiba’s decision to scrap future nuclear construction plans after the completion of projects that are underway now could mean the end of nuclear construction altogether in the United States, according to the MIT Technology Review.

“It’s likely to have a very chilling effect,” MIT nuclear science and engineering professor Michael Golay told the publication.