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Toshiba Corp TYO: 6502

Toshiba Westinghouse will decide by month’s end whether to file for Chapter 11 bankruptcy. The unit must decide soon to report its audited third quarter earnings. The report has been hampered by delays.

According to Power Sour: “On the U.S. side, they have to decide about (whether to file for) Chapter 11 quickly and until they do that, it seems it is difficult for them to file their earnings,” Finance Minister Taro Aso told a regular post-cabinet briefing on Friday.

People familiar with the matter have told Reuters that Westinghouse, which has been hit by huge cost overruns at two U.S. projects, had brought in law firm Weil Gotshal & Manges LLP as an exploratory step, but had not yet taken a decision on a bankruptcy filing.

The Toshiba write down caused chaos industry wide. Scana Corp. may pursue a new contractor to finish two nuclear reactors in South Carolina. That is what may happen if Toshiba cannot finish the job. That is because of the Toshiba write down and, now, demise of Toshiba Westinghouse.

Scana Corp. could complete the work itself at the V.C. Summer nuclear station. Toshiba Westinghouse Electric Co. gives up. Scana’s CEO Kevin Marsh made the comment during a conference call.  Scana expects Toshiba to pay for any additional costs due to the reactor delays. A current deal outlines the arrangement.

Shares dropped in Tokyo to an 11-month low after investors learned of the Toshiba write down. The call was the most extensive talk Scana gave since Toshiba revealed its $6.3 billion write down. Scana may face nearly $2 billion in costs related to the write down said analysts. Scana shares fell over 2.2 percent to $65.87 on Friday. The company dropped 10 percent since the beginning of the calendar year. This made the company the worst-performing member of its index. Analysts believe Scana must consider all options now.

Scana may ask state lawmakers to help the company recoup costs from the nuclear project. The utility company got a letter of credit for $45m out of $100m from Toshiba. Plus, Scana will receive IP rights from reactor designs. Scana will pay Toshiba only once construction milestones are reached. Toshiba promised Scana it will complete the nuclear reactors. But the first one will be complete by April 2020. The next reactor will come online in December 2020. Toshiba promised to complete the reactors, according to Scana officials.

Toshiba Westinghouse woes began and ended with a pipe maker in Louisiana. That was The Shaw Group Inc. But the conglomerate has a lot of money at risk.

Shaw got out of the nuclear business. The company sold itself $3.3 billion to Chicago Bridge & Iron Co. CBI was a much bigger firm and wanted in on the nuclear sector.  But the company made no progress and cut its losses later. CBI sold most of Shaw’s assets to Toshiba for $229 million. The firm shed most of its liabilities for the lower price. But Toshiba realized it miscalculated the $2.2 billion cost.

Toshiba Westinghouse Dilemma Continues

Toshiba wanted to renegotiate, but CBI sued for breach of contract instead. That lawsuit remains ongoing. Instead Toshiba asked Fluor Corp. to get its nuclear projects on track. But no one knows how those plans will turn out.

The company’s woes caused upheaval for its shares. Toshiba’s shares fell by 50 percent over the last month and a half. $7 billion in market value gone. According to Bloomberg, the industry changed since Toshiba entered the market.

Source: Power Source

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