Toshiba Corp.'s plan to seek Chapter 11 bankruptcy protection for Westinghouse Electric Co., the Japanese electronics giant's U.S. nuclear unit, could develop into a diplomatic problem.
Toshiba is considering applying for bankruptcy protection for Westinghouse in an apparent bid to eliminate risks of losses through canceling unfavorable contracts that the subsidiary had signed. Still, it remains to be seen whether Toshiba will be able to proceed with the application.
Westinghouse is currently building two cutting-edge AP1000 reactors at V.C. Summer Nuclear Station in South Carolina. However, under the contract with the plant's owner, Westinghouse must foot any costs caused by delays in the work and other problems.
Westinghouse's expenditures have snowballed as a result of a long delay in the work largely because Westinghouse, which had not built a nuclear reactor in the U.S. for about 30 years, was inexperienced, causing a huge amount of losses to Toshiba, according to a senior official of the electronics giant.
As such, calls have been growing within Toshiba urging that the company apply for Chapter 11 bankruptcy protection for Westinghouse to eliminate nuclear power station-related cost risks. A lawyer who specializes in the U.S. Bankruptcy Code is optimistic that, considering the state of Westinghouse, a U.S. court would uphold such an application.
Former U.S. Nuclear Regulatory Commission (NRC) official Lake Barrett has pointed out that cost overruns are common when building state-of-the-art nuclear reactors, and that the power company and the contractor normally share those extra outlays.
Still, there is a high hurdle for applying for Chapter 11 bankruptcy protection.
Westinghouse is also building two reactors at the Vogtle Electric Generating Plant in Georgia. The state's Public Service Commissioner Tim Echols has warned Toshiba's application for Chapter 11 bankruptcy protection would be a terrible choice.
The U.S. government has guaranteed $8.3 billion (some 950 billion yen) in loans for the construction of two AP1000 reactors at Vogtle. If Westinghouse goes into Chapter 11, the matter could develop into a diplomatic dispute.
Economy, Trade and Industry Minister Hiroshige Seko is set to visit the U.S. shortly and possibly meet with Secretary of Commerce Wilbur Ross and Secretary of Energy Rick Perry to ascertain the U.S. stance toward the Westinghouse situation.