Toshiba’s N-power unit Westinghouse files for bankruptcy

Westinghouse Electric Company LLC, which collapsed in the wake of project delays and crippled earnings and brought about a projected annual loss of $9.1-billion to its Japanese owner Toshiba Corporation, has finally filed for Chapter 11 bankruptcy in a New York court.

Westinghouse Electric Company, which helped drive the development of nuclear energy and the electric grid itself, was done in mostly by self-inflicted injuries, including a disastrous deal for a construction business that was intended to control costs and instead precipitated the events that led to the filing on Wednesday.

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. Now, the future of those projects, which once seemed to be on the leading edge of a renaissance for nuclear energy, is in doubt.

But some of its problems were beyond the control of either Toshiba or Westinghouse. Slowing demand for electricity and falling prices for natural gas have eroded the economic rationale for nuclear power, which is extremely costly and technically challenging to develop. Alternative-energy sources like wind and solar power are rapidly maturing and coming down in price.

Also, the 2011 earthquake in Japan that led to the nuclear disaster at the Fukushima Daiichi plant renewed worries about safety.

The collapse of Westinghouse, once the linchpin of Toshiba's plans to diversify away from consumer electronics, forced the Japanese conglomerate to put its prized memory chip unit up for sale just as it was recovering from a profit-padding scandal that claimed the scalps of senior executives (See: Toshiba seeking $8.8 bn for majority stake in chip business: report).

Westinghouse Electric Company LLC, a US-listed company, and certain of its subsidiaries and affiliates, today filed voluntary petitions under Chapter 11 of the US Bankruptcy Code. The company is seeking to undertake a strategic restructuring as a result of certain financial and construction challenges in its US AP1000 power plant projects.

Westinghouse has obtained $800 million in debtor-in-possession (DIP) financing from a third-party lender to help fund and protect its core businesses during its reorganisation. The Chapter 11 filings took place in the US Bankruptcy Court for the Southern District of New York in New York City.

''Today, we have taken action to put Westinghouse on a path to resolve our AP1000 financial challenges while protecting our core businesses,'' said Interim president and CEO José Emeterio Gutiérrez. ''We are focused on developing a plan of reorganization to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader.''

The DIP financing will fund Westinghouse's core businesses of supporting operating plants, nuclear fuel and components manufacturing and engineering as well as decommissioning, decontamination, remediation and waste management as the company works to reorganise around these strong business units. Existing letters of credit have been cash collateralized in full and will remain in place. The financing will also allow for new letters of credit to be issued.

The company has reached an agreement with each owner of the US AP1000 power plant project to continue these projects during an initial assessment period. ''Westinghouse remains committed to its AP1000 technology as the industry's premier Gen III nuclear power plant design, and will continue its existing projects in China as well as pursuit of other potential projects in the future.''

Westinghouse's operations in its Asia and Europe, the Middle East and Africa (EMEA) Regions are not impacted by the Chapter 11 filings. Customers in those regions will continue to receive the high-quality products and services they have come to expect in the usual course as the regions will also be supported by the DIP financing.

As part of today's Chapter 11 filings, Westinghouse also filed several ''first day'' motions with the court to ensure business continuity through payment of employee salaries, wages and benefits, as well as pay its suppliers for the delivery of services. The motions are expected to be approved by the Bankruptcy Court.

Westinghouse is represented by Weil, Gotshal & Manges LLP in its Chapter 11 cases.