Battered Toshiba to exit plans to build nuclear plants in India, UK
Wrestling with a nearly $6 billion writedown, Toshiba Corp plans to withdraw from a lead role in projects to build nuclear power plants in India and Britain.Updated: Feb 03, 2017 14:58 IST
Toshiba Corp plans to withdraw from its lead role in projects to build nuclear plants in Britain and India, sources with direct knowledge of the matter said, marking a retreat as it wrestles with an imminent multi-billion dollar writedown.
Such a move would leave Toshiba’s US-based Westinghouse focused on the much narrower field of nuclear reactors and services, rather than civil engineering for nuclear power plants, or their construction, the sources said.
But it would throw into question the future of a key plank in Britain’s plans to replace ageing nuclear reactors, and the future of India’s biggest nuclear project to date.
In India, Westinghouse has been in talks with state-owned Nuclear Power Corporation of India about a contract to build six AP1000s, a project strongly backed by both Prime Minister Narendra Modi and former US president Barack Obama.
Three sources said that was now almost impossible.
“The Indian government was happy to have one sole counterpart, but this cannot continue,” the first source said, adding that either an Indian civil engineering group or a foreign, possibly American, group would have to step in to negotiate, oversee and eventually finance the project.
Westinghouse would instead just provide nuclear equipment, the source said.
Representatives for India’s state-run nuclear body and the ministry of external affairs did not immediately respond to requests for comment.
Toshiba became one of the nuclear sector’s biggest players with the purchase of Westinghouse in 2006, the height of a short-lived boom. But the industry was left battered by the 2011 Fukushima nuclear disaster and Toshiba’s woes have only deepened – first with a 2015 accounting scandal and now damaging cost overruns at US projects.
Sources familiar with the matter have said the writedown on the US business – set to be detailed on February 14 when Toshiba reports earnings – could be around $6 billion, wiping out the group’s shareholder equity.
Westinghouse has traditionally been a builder of nuclear reactors, not entire nuclear power plants including steam turbines, generators and transformers.
But as tightening safety regulations following Fukushima made building nuclear plants more expensive, nuclear reactor builders and their shareholders have been increasingly forced to take on the civil engineering side too.
A source said Westinghouse will return to its roots as a nuclear specialist, while Toshiba will stop taking on projects to build entire nuclear plants just so that Westinghouse can sell its AP1000 reactors.
“Toshiba will withdraw from being a general contractor for nuclear plants,” the source said.
NuGen, a Toshiba-led venture with French utility Engie, was set up to build three AP1000 nuclear reactors designed by the Japanese conglomerate’s Westinghouse unit at the Moorside site on the coast of Cumbria in the UK.
But the $15 billion-$20 billion investment is now an impossible financial burden for Toshiba to help shoulder, one of the sources said, adding it had not yet notified the UK government.
Two of the sources said Engie also wants to pull out of NuGen, as new chief executive Isabelle Kocher does not want to invest in new nuclear projects. Engie declined to comment.
That could leave Britain searching for new backers.
“It has to be someone with a big cheque book. The real question for London is to what extent should this be a private sector venture anyway,” said one veteran adviser.
One of the sources said Toshiba was considering a full exit from the NuGen project, in which it currently has a 60% stake, but would take a firm decision once it had completed the sale of a stake in its memory chips business. That sale was announced last month but started on Friday.
All three sources with knowledge of the matter declined to be identified as they were not authorised to speak to the media.
A Toshiba spokesman said it was reviewing all its nuclear power business outside Japan. “Nothing has been decided at this time, including the impact on our Moorside nuclear project.”
NuGen declined to comment.