Published: Sun, April 09, 2017
Economy | By Melissa Porter

Shareholders approve spinoff of Toshiba's prized memory chip unit

Japan's embattled Toshiba Corp. said Wednesday that its US nuclear unit Westinghouse Electric Co. has filed for bankruptcy protection, marking a key step in its struggles to stop the flow of massive red ink from a business that has a corporate history linked to Baton Rouge.

A bankruptcy filing will allow Pittsburgh-based Westinghouse, whose nuclear plant projects have been dogged by delays and cost overruns, to renegotiate or break its construction contracts, although the utilities that own the projects would likely seek damages.

The filing comes as the company's corporate parent, Toshiba, scrambles to stanch huge losses stemming from Westinghouse's troubled nuclear construction projects in the American South.

Toshiba said last month it expected to write down 712.5 billion yen ($6.2 billion) in its nuclear-power business, citing cost overruns at Westinghouse and diminishing prospects for atomic-energy operations.

Westinghouse said it secured financing of $800 million to fund as well as protect core businesses during the reorganization.

Pittsburgh-based Westinghouse, crippled by cost overruns at two U.S. power plant projects in Georgia and SC, will file for protection under Chapter 11 of the U.S. Bankruptcy Code, the people told Reuters on Thursday.

The Japanese giant is trying to spin off its prized memory chip business to raise cash, after earlier selling its medical devices unit and most of a home appliance business.

Toshiba acquired Westinghouse in 2006 for $5.4 billion, then a major bet on a rebirth in nuclear projects due to high oil and gas prices, convinced that governments would cap carbon emissions to prevent global warming.

It added: "Toshiba is committed to invest until the FID (final investment decision), but there is a certain point before the FID where we can review and determine whether or not to continue the project".

Meanwhile, Toshiba reiterated its view that at the root of the problem was the acquisition of US nuclear construction company CB&I Stone and Webster. Until its buyout, most of Toshiba's experience was in building boiling-water reactors, but Westinghouse gave it expertise in pressurized water systems too.

The incident soured public attitudes toward nuclear power around the world, including in the United States, where officials have since moved toward decommissioning aging plants in New York, California, and IL. However, the problem appeared since the USA government failed to adopt the legislation for curbing the carbon emission.

Toshiba said in a statement that it filed the Chapter 11 petition in the U.S. Bankruptcy Court of NY.

Westinghouse was purchased by Toshiba in 2006 for $5.4 billion has suffered massive cost overruns in two U.S. projects.

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