CNBC- Westinghouse Electric, a unit of Japanese conglomerate Toshiba, filed for bankruptcy on Wednesday, hit by billions of dollars of cost overruns at four nuclear reactors under construction in the U.S. Southeast.
The bankruptcy casts doubt on the future of the first new U.S. nuclear power plants in three decades, which were scheduled to begin producing power as soon as this week, but are now years behind schedule.
The four reactors are part of two projects known as V.C. Summer in South Carolina, which is majority owned by SCANA, and Vogtle in Georgia, which is owned by a group of utilities led by Southern Co.
Costs for the projects have soared due to increased safety demands by U.S. regulators, and also due to significantly higher-than-anticipated costs for labor, equipment and components.
Pittsburgh-based Westinghouse said it hopes to use bankruptcy to isolate and reorganize around its "very profitable" nuclear fuel and power plant servicing businesses from its money-losing construction operation.
Westinghouse said in a court filing it has secured $800 million in financing from Apollo Investment, an affiliate of Apollo Global Management , to fund its core businesses during its reorganization.
For Toshiba, the filing will help keep the crisis-hit parent company afloat as it lines up buyers for its memory chip business, which could fetch $18 billion. Toshiba said Westinghouse-related liabilities totalled $9.8 billion as of December.
Toshiba said it would guarantee up to $200 million of the financing for Westinghouse. Toshiba shares closed up 2.2 percent but have lost half their value since the nuclear problems surfaced late last year.
The Apollo loan needs court approval and is expected to carry Westinghouse for a year, people familiar with the matter said. The funds would support the company's global operations, including its healthier services and maintenance businesses, and pay for construction workers on site in Georgia and South Carolina, the people said.
However, the money cannot be used to repay the liabilities stemming from cost overruns and delays at the projects, the people said.
SCANA told investors on a conference call on Wednesday that 5,000 workers would continue working on its South Carolina site for 30 days while the company weighed options.
"Our preferred option is to finish the plants. The least preferred option is abandonment," said SCANA CEO Kevin Marsh. Southern Co said in a statement it would hold Westinghouse and Toshiba accountable for its contract.
State regulators have approved costs of around $14 billion for each project but Morgan Stanley has estimated the final bill of around $22 billion for the South Carolina project and around $19 billion for the Georgia plant.....
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