Westinghouse, one of the most storied names in the nuclear energy business, filed for bankruptcy Wednesday, dealing a blow to the nuclear power industry and raising questions about the fate of four reactors under construction in the United States.
The filing also ends the marriage of Toshiba and Westinghouse, one of a handful of nuclear contractors left worldwide. When the Japanese giant — maker of products as diverse as medical devices and home appliances — bought the Westinghouse nuclear business in October 2006, it declared “the dawn of a new era for nuclear energy.” Together, the companies would make a “powerful combination,” Toshiba said.
A decade later, that combination has melted down. Toshiba has written off more than $6 billion in losses connected to its U.S. nuclear business, citing accounting problems, delays and cost overruns. And it has pulled back from new nuclear projects under discussion in India and Britain.
The crisis for Westinghouse and Toshiba coincides with President Trump’s effort to scrap former president Barack Obama’s Clean Power Plan and with continuing apathy in Congress and the administration toward adopting a carbon tax. Either of those measures would have been likely to improve nuclear power’s competitiveness with renewables or cheap natural gas, which have been gaining domestic market share.
The bankruptcy filing will trigger legal questions about whether Toshiba remains responsible for losses at Westinghouse and whether the utilities that own the reactors under construction will have to eat more of the cost of completing them. That could mean higher rates for consumers in those areas.
In seeking protection under Chapter 11 of the bankruptcy act, Westinghouse could still finish building those plants. Westinghouse said it has arranged $800 million in financing so that it can continue to serve customers while restructuring its business.
The collapse of Westinghouse also reverberates through the global nuclear business.
The company supplied the world’s first commercial pressurized water reactor 60 years ago, and half the world’s 430 nuclear power reactors have Westinghouse technology.
Westinghouse had claimed that its new AP1000 model reactor had passive technology and modular design that was safer, cheaper and faster to build. Many U.S. lawmakers and nuclear industry boosters said the AP1000 could augur in a “nuclear renaissance” in the United States.
The company is in charge of constructing four of these new model reactors at two sites. The first two are being built by a SCANA-led group at the Virgil C. Summer Nuclear Generating Station, about 20 miles northwest of Columbia, S.C. The other two, backed by Energy Department loan guarantees, are being built at Southern Co.’s Vogtle facility.
Yet Westinghouse stumbled at both sites. Although the AP1000 was supposed to be a standard design, changes were made in South Carolina. Westinghouse plans also included modules built in Lake Charles, La., that were supposed to fit together “like pieces of Lego,” a former regulator said. But Nuclear Regulatory Commission files say that faulty modules from Lake Charles forced Westinghouse to reweld them at the reactor sites.
Currently, the Vogtle project is $1.8 billion, or 29 percent, above budget and three years behind schedule. Angry about the delays and cost overruns, the owners of the nuclear plants filed claims against Westinghouse. A settlement was reached, but the legal battles are likely to restart.
Both South Carolina and Georgia allow utilities to charge ratepayers for power-plant construction still in progress. But the utilities must get approval from their public service commissions, which have forced the utilities to absorb some of the costs.
Southern Co. subsidiary Georgia Power, one of the co-owners of the Vogtle reactors, said it was “working with Westinghouse to maintain momentum at the site.” It said it would consult with the Georgia Public Service Commission and its partners “to determine the best path forward.” The company added that it would seek to hold Toshiba and Westinghouse accountable. Southern’s chief executive, Thomas A. Fanning, is in Tokyo for talks.
The United States relies on nuclear energy to provide about 20 percent of its electricity needs. Yet the 100 U.S. reactors, with an average age of 35, are getting old. Few nuclear contractors, many state-owned, can replace them. And many of those are struggling; shares of the French firm Areva have tumbled 84 percent over the past five years.
“As these units get decommissioned, to stay at that percentage you need more units,” said Dan Aschenbach, a senior vice president at Moody’s. “But you can’t get there if you cannot construct it.”
The Westinghouse bankruptcy also ends a chapter of nuclear energy diplomacy. The Pennsylvania-based Westinghouse, although owned by Toshiba, won U.S. political backing for its efforts to win contracts abroad. The administrations of George W. Bush and Barack Obama pressed the Indian government to buy reactors made by Toshiba-Westinghouse or Hitachi-General Electric. India was negotiating to buy half a dozen AP1000s.
But questions of liability in the event of an accident blocked deals in India. Although Westinghouse has nearly completed four reactors in China, it had hoped to capture a bigger share of the Chinese market. In China, too, Westinghouse has grappled with delays; it told the bankruptcy court the reactors would come online in late 2017 and early 2018 — four years late.
Toshiba has been shopping for a buyer for Westinghouse, but few firms are able or willing. Korea Electric Power Corp. has a nuclear engineering subsidiary. While Chinese nuclear firms might be interested in the Westinghouse technology, China has its own CAP1000. Moreover, the Trump administration must approve any sale to a foreign buyer.
“There is a lot of value in that design going forward, and a lot of the challenges are being dealt with right now,” said Jeffrey Merrifield, a former NRC commissioner now at the law firm Pillsbury Winthrop Shaw Pittman. He said there were “a variety of coalitions forming” of U.S. companies interested in purchasing all — or part — of Westinghouse.
Another wrinkle in the Westinghouse saga is the $8.3 billion in loan guarantees the Energy Department provided to help finance the Vogtle reactors. Those guarantees were given to the utilities, so taxpayers would not be liable for losses unless the utilities were unable to make payments.
“These AP1000s were a much better mousetrap for the nuclear industry,” said Peter Davidson, who directed the Energy Department’s loan programs office and is now chief executive of Aligned Intermediary, an investment advisory firm for climate projects. “It’s sad that there were so many implementation issues and delays. These are more arrows in the side of the large-scale nuclear industry.”