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Toshiba's Westinghouse Files For Bankruptcy After Crippling Cost Overruns

Toshiba's Westinghouse Files For Bankruptcy After Crippling Cost Overruns
As Toshiba Corp seeks to limit losses that threaten its future and just three months after huge cost overruns were flagged, the Japanese parent's U.S. nuclear unit Westinghouse filed for Chapter 11 protection from creditors on Wednesday.
Even though the utilities that own the projects could seek damages, renegotiating or even breaking its construction contracts would be possible for Pittsburgh-based Westinghouse, once central to Toshiba's diversification push due to the bankruptcy filing. a sale of all or part of the business could even be paved by this.
Keeping the group afloat and fencing off soaring liabilities is the aim for Toshiba. While Toshiba had earlier estimated writedowns would swell to $6.3 billion, the Westinghouse-related liabilities is one of the industry's most costly collapses to date which totaled $9.8 billion as of December.
And up from an earlier loss forecast of 390 billion and one of the biggest annual losses for a Japanese company ever, it expected to book a net loss of 1 trillion yen ($9 billion) for the year ending in March as a result, Toshiba said.
A separate 2015 accounting scandal had rocked Toshiba and Westinghouse's bankruptcy is the latest financial debacle to buffet corporate Japan. The company has put its prized memory chip unit up for sale to cover upcoming losses,
"Toshiba concluded that a Chapter 11 filing was essential to rebuild Westinghouse," Toshiba CEO Satoshi Tsunakawa said at a news briefing in Tokyo.
Given the scale of the collapse and U.S. government loan guarantees for new reactors, the filing could embroil the U.S. and Japanese governments, and will now trigger complex negotiations between the Japanese conglomerate, its unit and creditors.
To fund and protect core businesses during its reorganization, it has secured $800 million in financing, Westinghouse said.
It would guarantee up to $200 million of the financing for Westinghouse, said Toshiba, whose shares have crashed as the nuclear problems surfaced.
Nuclear projects in varying degrees of development in India, the United Kingdom and China are under construction by Westinghouse, which Toshiba acquired a decade ago. The filing would not impact its operations in Asia, Europe, the Middle East and Africa, the U.S. unit said.
Stemming from the ill-conceived acquisition of a U.S. nuclear construction company in 2015, the U.S. business is at the heart of the collapse.
As the bankruptcy could increase costs borne by U.S. taxpayers for two nuclear power plants projects in Georgia and South Carolina, criticism from U.S. President Donald Trump over the impact it could have on local jobs and finances could be incited by Westinghouse's collapse, Japan fears.
While commissioning the Georgia project loan guarantees totaling $8.3 billion to the utilities were guaranteed by the U.S. government.
The two governments were having thorough discussions on the issue, said Japan's government spokesman Yoshihide Suga.
Convinced that governments would cap carbon emissions to prevent global warming, a major bet on a rebirth in nuclear projects due to high oil and gas prices was placed by Toshiba as it acquired Westinghouse in 2006 for $5.4 billion.
The company expected that it would be allowed to build a pipeline of future work for its nuclear power plant maintenance division through contracts to build dozens of its new AP1000 reactors.
In a sign of a nuclear renewal taking hold, regulators in both Georgia and South Carolina approved the construction of AP1000 reactors in 2009. But, when the United States failed to adopt legislation curbing carbon emissions, the activity came to a standstill by the end of 2011.


Christopher J. Mitchell

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