Westinghouse Bankruptcy Puts Fate Of Four U.S. Nuclear Reactors In Limbo

Tyler Durden's picture

When Westinghouse Electric filed for Chapter 11 bankruptcy protection on Wednesday morning, few were surprised as the outcome was the only one which allowed the company's troubled, and near-insolvent Japanese parent, Toshiba, to continue operating, even if it meant the bankruptcy of the iconic company. Westinghouse was one of the originators of the nuclear age, building the world’s first commercial nuclear reactor 60 years ago. Its pressurized water reactor design is in 430 power plants and accounts for 10% of electricity generated in the world.

However, few were prepared for the unexpected aftermath of this particular bankruptcy, which has set off a showdown between Toshiba and a major U.S. utility, has left the fate of four half-finished nuclear reactors and is threatening to drive a wedge between the US and Japanese governments over the fate of industries each considers vital.


The Vogtle Unit 3 and 4 site, a Westinghouse project, near Waynesboro, Ga., in February

For those who have missed our previous discussion on the underlying cause for today's default, Westinghouse incurred billions in runaway cost overruns related to four nuclear reactors it is building in the southeastern U.S. These costs from the half-finished reactors had spiraled so large, they threatened the viability of its Japanese parent company, Toshiba, which in turn has been engulfed in a series of accounting and fraud scandals in recent years, has seen its profitability plummet and whose precarious finances have attracted attention of Japan’s government.

Admitting defeat in the nuclear business, Toshiba CEO Satoshi Tsunukawa said that “this is a de facto withdrawal from the overseas nuclear business for us. Therefore, we don’t see any more risk."

Others, however, see substantial risk now that their claims against Westinghouse are reduced to the status of a prepetition unsecured claim. First and foremost, is Toshiba's now former, and quite angry customer, Tom Fanning, CEO of Southern Co., the Atlanta power company and primary owner of two of the reactors being built in Georgia, who on Wednesday characterized the completion of the reactors as an international political issue, calling it a test of Prime Minister Shinzo Abe’s commitments with President Donald Trump at a summit in February to help create American jobs.

“The commitments are not just financial and operational, but there are moral commitments as well,” Mr. Fanning said in an interview from Tokyo, where he had traveled to lobby for a resolution to the mounting dispute. Quoted by the WSJ, Fanning said there are 5,000 jobs directly at stake at the two Georgia reactors, jobs that could be lost if Toshiba doesn’t commit to paying billions in future costs, which it won't now that it has severed ties with its insolvent subsidiary.

Westinghouse designed the reactors and also is building them for Southern, and contractually had agreed to shoulder cost overruns, at least until its Chapter 11 filing this morning.

Perhaps unaware of the ramifications, Trump administration officials were quiet on the bankruptcy Wednesday.

According to the WSJ, the U.S. Department of Energy, which has provided an $8 billion loan guarantee for the Georgia reactors, said it was in discussions with various companies. “We are keenly interested in the bankruptcy proceedings and what they mean for taxpayers and the nation,” said Lindsey Geisler, an agency spokeswoman.

Ironically, based on a new Westinghouse design, the reactors, the first to be constructed in the U.S. in nearly four decades, were supposed to be an answer to cost overruns and delays that have dogged the nuclear power industry. We say ironically, because it is cost overruns and delays that eventually led to the company's bankruptcy.  Worse, these plants are already years behind schedule in addition to causing huge losses for Toshiba.

Toshiba said it expected to lose about $9 billion in the fiscal year ending March 31, largely because it guaranteed nearly $6 billion in Westinghouse’s obligations to Southern and Scana Corp.—the company for which Westinghouse is building the other two reactors in South Carolina.

What happens next is unclear. After the bankruptcy filing, Southern and Scana have said they would finance continued construction of the reactors for 30 days, but weren’t clear where construction funding would come from after that time. Scana also said, for the first time, that it would consider abandoning the two reactors underway if costs changed dramatically.

More problematic are the potential political implications: Southern's CEO has made it clear he intends to escalate this to the level of an international conflict if he must. Fanning, who said he has spoken to Vice President Mike Pence, Commerce Secretary Wilbur Ross and Energy Secretary Rick Perry about the importance of completing the reactors, argued that more was at stake economically than the direct future of the facilities.

“Westinghouse declaring bankruptcy has national security implications,” said Mr. Fanning, who also happens to be chair of the board of the Atlanta Fed.

Fanning said the estimated cost of the entire project was roughly $16 billion, but cautioned that the companies were unsure of how much more was needed to finish the partially built reactors. The current target dates for completion of the Georgia reactors are 2019 and 2020, three years behind the original schedule.

Richard Nephew, a fellow at the Center on Global Energy Policy at Columbia University, said Mr. Fanning appeared to be using the Trump administration’s reputation for defending U.S. jobs and taking a tough stance even with allies, to his advantage.

 

“This is someone who knows what the triggers are for this administration,” Mr. Nephew said. “Everyone now has a sense of what the president’s triggers are and I wouldn’t be surprised if a lot of companies use those triggers to gain an advantage in negotiations with foreign companies.”

Another problem is the overall viability of nuclear energy.  Toshiba casting away Westinghouse is merely the latest indication of an industry in turmoil, demonstrated recently by Siemens' decision to abandon the industry, Areva SA’s financial and safety problems, the falling market value of China General Nuclear Power Group and the junk-bond status of Russia’s Atomenergoprom.

“I don’t see how this can mean anything but even greater cost growth for the plants under construction and an unacceptable risk for any that are under consideration,” said Fred Beach, assistant director of the Energy Institute at the University of Texas at Austin.

Meanwhile, the biggest threat from the bankruptcy is fallout in the already tense diplomatic relations between the US and Japan.

A Japanese government official said the U.S. had not raised Mr. Fanning’s complaints with the Abe administration and that there had been no request for help to keep the projects alive. “This is a private company’s business and operation,” the person said.

It will hardly remain that way, and it remains to be seen what will happen if and when Trump demands that Japan make whole the US companies that were cheat by Toshiba's decision.

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LN's picture

Glowing in the dark will be most helpful, just think of all the energy that will be saved.

LN

auricle's picture

Nuclear energy in it's present form is a completely failed experiment. All of these reactors and their spent fuel continue to be ticking time bombs. 

LN's picture

"All of these reactors and their spent fuel continue to be ticking time bombs. "

Yes, for 100,000 years, name one thing us humans have done that's lasted half that long, a quarter, 10%, anyone?

LN

I see we have a drive by down voter with no comments.  Figures.

business as stusual's picture

Once the lid is blown off of the Antarctic, we are going to see a great many things that are that old and older.

Once the true history of the human race is known, there will be an absolute avalanche of things ancient.

Sudden Debt's picture

And while you're dreaming of Antartica, your electricity bill will rise by 200% in the next 5 years.

Mark my words...

cossack55's picture

Good. Maybe it will kill the cancerous 5G Network

onthesquare's picture

“Westinghouse declaring bankruptcy has national security implications,” 

Here they go with the security nonsense again.  fail to plan then plan to fail.

onthesquare's picture

We here in Ontario will happily take that 200% over 5 years.

divingengineer's picture

We been fucking, and killing.
Not much more for 100,000 years.

LN's picture

Ah yes, the exponential curve, we're getting quite good a both activities, then we hit the wall.

See Dr. Albert Allen Bartlett, University of Colorado at Boulder.  You can find him on youtube. The bottle is 75% full, what time is it?

LN

Jack's Raging Bile Duct's picture

The pyramids at Giza are about 5% that duration. Keep in mind that Cleopatra also lived more near to the time of the Apollo program than she did the completion of the pyramids. Could you hope to explain to her our present state of technology? Could you explain our present state of technological development to an ordinary person who lived in 1830?

The spent fuel wouldn't be a problem if politicians would let reactors recycle and reuse it, like the rest of the world does. For the record, I didn't neg you.

Gold Pedant's picture

Not too long ago, I looked up the "China Syndrome" by Hanoi Jane on IMDB. Not surprisingly, it had some ungodly high rating. Watching it again, I didn't need to be reminded of how lousy Michael Douglas was or how amazingly retarded the storyline was with respect to the nonexistent "children" that just couldn't show up to that durn protest. Ted Turner married the dingbat. Even he couldn't stand her after a while.

Once we have the hippies and millenials polarized against all forms of electricity generation, we can write off things like thorium reactors and traveling wave reactors. Not to jump to conclusions, but the USAF got their X-37 program running quite nicely around the time that the Shuttle program was canned. Someone still needed that orbiter! Likewise, we just have to find a way to create really nice weapons out of something that can be produced by such reactors, and the rest will come organically.

Gold Pedant's picture

Also, if you want a perspective of what it is like to walk through a NPP that had just started to test fire its reactors and was instantly decomissioned, watch this video. Everything is tagged fifty times over and by about a hundred witnesses. It is too bad, however, that a 40-year-old pipe is still a 40-year-old pipe or a 50-year-old design is still a 50-year-old design because just about any update is VERBOTEN.

 

I think that the high point of the video is finding this tag on an "abandoned" scaffold 20 years after the fact and probably tagged 1 month, after it was put into service.

 

https://www.youtube.com/watch?v=ONEm1ph3MP4

Déjà view's picture

$hit hit Westinghouse fan...

brianshell's picture

Now that westinghouse is toast, it is time to start the make American Energy Great Again plan. It is time to kick start the Thorium Manhatten Project.

Mr. Trump, fast track this new energy project. Thorium TMSR power plants have the promise to solve our energy problems far into the future. When fully developed, they will be cheaper than coal. They are safe (unlike the Westinghouse reactors). They free us from the middle east fossil fuel sourcing problems. TMSR can power desalinization plants to save the California valleys. They can produce enough electricity to power the electric cars of the future along with trucks and trains. They can be installed in ships. They can burn all the current waste left over from old fashioned reactors. Thorium is found with rare earth ores which are used to make the super magnets needed in electric cars.

Think about the hope for peace in the world when competition for energy is no longer necessary because thorium is found all around the planet. Think about the clean air, even in places like Beijing when coal is no longer needed for heating. Fracking will no longer be necessary. Fossil fuels will no longer be needed. Long distance high voltage transmission lines will no longer be needed.

But time is short because China has already begun their fast track Thorium project and will secure all the key patents if we delay.

You are a businessman, Mr Trump. Envision the amazing possibilities before us if you take this first step now before it is too late.

HockeyFool's picture

Exactly. the problem is that Jimmy Carter back in the 1970s out lawed the reprocessing of spent fuel from commercial nuclear reactors. He cited "potential terrorism" as the reason. You know, because some terroris group could steal a spent fuel rod and make a bomb.

What we should do is offer to sell the spent fuel to Isis and let them try their luck. They will all be dead as soon as they open the casks.

 

Back in the days I worked in the nuke industry, we called that company "Rustinghorse."

LN's picture

Loved your time line..

"Cleopatra also lived more near to the time of the Apollo program than she did the completion of the pyramids."

But, "The spent fuel wouldn't be a problem if politicians would let reactors recycle and reuse it, like the rest of the world does."  The spent fuel is only part of the problem, see Fukushima Japan.  Building machines with no off switch might be a bad plan for the future viability of the human genome, but, there are profits to be made, and nuclear wars to fight.

LN

divingengineer's picture

Bankruptcy for Westinghouse is different than bankruptcy for you or I.
They will not cease to exist, they need to cram write downs of their debt down their lenders' throats.
It will be back to it's TBTF self in no time.

LN's picture

Yes, TBTF.  How big must one get to reach this level, what caloric intake will be required to achieve this goal, will my knees handle the load...?  Questions, questions.

LN

Midas's picture

One thing not mentioned in this article is the amount of damage the natural gas boys are causing everyone.  They are putting electricity on the line so cheap they are causing everyone else problems. 

GUS100CORRINA's picture

What I have never understood is why NUCLEAR with Natural Gas and Coal being so cheap and plentiful?

Let me quote Albert Einstein ..

Nuclear power is one hell of a way to boil water!!!!

Damn EPA and environmentalists with their OBSESSION over CO2 caused this situation.

Remember FUKUSHIMA ... 40 years and 250 billion+ dollars to clean-up mess and decommision site.

FUKUSHIMA is a trophy to MAN's stupidity!

Gold Pedant's picture

Yep, even the "smart" Japanese ignore thousands of markers of DO NOT BUILD HERE and build a reactor right where it will be inundated. There are safe ways to build nuclear reactors. Uranium reactors are not a particularly good idea, and any advances have been stifled by a programmed public paranoid of the air that they exhale.

I Feel a little Qeasy's picture

I fear you are right, all by design to fuck the Japanese, or any foreign entity that gets mixed up with you cunts.

silverer's picture

Melt 'em down, collect the insurance.

LN's picture

They'll melt down all by themselves, and WE insure them.

LN

waterwitch's picture

Actually there is no insurance available. The 'coverage' is outlined in the Price Anderson act  which puts a ceiling on liability.  If a US plant has an 'excursion' good luck collecting.  You'll line up behind all the FEMA claimants.  The nuclear industry is the only industry that is exempt from having to have insurance.  Isn't that great?!  No insurance company sells nuclear insurance. It's listed under "act of God".   And now many plants are well beyond their 30 year design life.  Tick tock...

LN's picture

Yes, I know, and that's where WE come into play.  Ain't it great.  How does one go about getting this type of deal?  I can think of a few profitable, but high risk endeavors that would benefit from such arrangement.

LN

ZippyBananaPants's picture

I used to work for Westinghouse. Back in the 80's. Turbine world headquarters in Orlando. They gave me a watch, still have it.
Sad

CunnyFunt's picture

WECTEC is having great difficulty finding contract workers to staff their supplier surveillance operations. All overtime has been cut. Turnover is a huge problem since 1099 contractors don't want to work a straight 40.

One Ton Lady's picture

every one of their damn reactors is a time bomb waiting to go off

 

they are bailing

 

the fuckers. 

flaminratzazz's picture

The reactors are 10 years past life expectancy..they should have been mothballed in 2000.

Houston, we have a problem...

Theta_Burn's picture

I live about 50 miles north of Americas oldest nuke plant..

https://en.wikipedia.org/wiki/Oyster_Creek_Nuclear_Generating_Station

Talk about being past life expectancy..

flaminratzazz's picture

Hanford down winder myself..Neighbor was working there last year and just had a chunck of his face cut off..

I wont go close to that fvkin place no matter how much they try to pay me.

You want to talk about a mess?

ho lee Phuk

LN's picture

Hanford, the gift that will keep on giving.  Hope you're far down wind.

LN

flaminratzazz's picture

I am a few hours north..not nearly far enough if that perking leaking explosion waiting to happen, happens.

Caught_Fish's picture

I checked the link, Holy Phuk.

How many of us drive a car that old or would get in a plane that old, or a boat?

All mechanical things deteriorate from the time of first use.

Radiation embrittlement has to be affecting these units.

PoliticalRefugeefromCalif.'s picture

..cue for the art of the deal eh?- kind of a different ball game playing chess with a bunch of agenda bound politicians with no loyalties but their own.

ah, I'm sure this will all work itself out.

PoliticalRefugeefromCalif.'s picture

fawlty towers moment..

Fundies's picture

Fuck they make good fridges.

booboo's picture

"BAILOUT"
Westinghouse is Siemens, Siemans is Westinghouse

waterwitch's picture

Stuxnet should have no problems then!

Dieselclam's picture

Nuclear power: "ladies and gentlemen, step right up to the greatest show on earth!  Power too cheap to sell!  Remember Hanford, WIPP, Simi Valley, Rockey Flats, three mile island, Fukushima, Chernobyl, Yucca Mountain, Washington Public Power Supply and Castle Bravo?  No?  Great!  That's OK!  We'll teach you the techniques for similar prosperity!  Step right this way and empty your wallet and humanity's future on this sure bet at 27% R.O.I. while we figure out what to do with the green glowing genie that's out of the bottle."

LN's picture

Did your R.O.I. include the insurance premiums?

:)

LN

uhland62's picture

They did say at the time that it would be so cheap that installing a metre would be pointless. 

They also told everyone "Gorleben is safe" - for the waste. And now?

Sellafied - billion pound drain on the the Brits. 

LN's picture

Yes, but, profits were made, we just got stuck with the bill.  No worries, they'll just raise taxes to cover the shortfall.

LN

Genby's picture

The first nuclear power plant was built in 1954 in Obninsk, USSR.

flaminratzazz's picture

Hanford Project, Hanford Works, Hanford Engineer Works and Hanford Nuclear Reservation. Established in 1943 as part of the Manhattan Project in Hanford, south-central Washington, the site was home to the B Reactor, the first full-scale plutonium production reactor in the world