Quick end to bankruptcy seen with July business plan,
leaving little time for Duke to meet NC deadline
Westinghouse Electric Company will emerge from bankruptcy “quickly, better, stronger,” interim president and chief executive Jose Gutierrez said in his first public speech since the company’s late March Chapter 11 filing. He spoke to the Wednesday session of the Nuclear Energy Assembly -- the Nuclear Energy Institute's (NEI) annual conference for the U.S. nuclear industry, held the week before Memorial Day in Scottsdale, Arizona. Reports on the meeting followed from Bloomberg, Axios Generate, WNN – World Nuclear News, and NEI that are the basis for this blog post.
During the Assembly, Bloomberg also interviewed Gutierrez and other Westinghouse officials, including David Howell, president of the Americas region, who said Westinghouse expects to file a business plan in bankruptcy court in July. The company expects approval of the plan “some months after,” he said.
The process of selling Toshiba’s Westinghouse stake could begin in the fall, "once we get further along in the Chapter 11 process,” chief operating officer Mark Marano said in an interview.
“At which point in time (Toshiba) may engage in a formal process to potentially seek new ownership for us.”
Possible bidders may come from China or South Korea, which are developing their own reactors for export, according to analysts and academics. Private equity firms are also among potential suitors. Apollo Global Management won a bidding war to lend Westinghouse $800 million to fund operations as it tries to reorganize.
Gutierrez spoke the same day as Southern Company chief executive Tom Fanning's widely reported comment to a Georgia shareholder meeting he now hopes to complete an evaluation of whether to complete Plant Vogtle in August or “late summer.”
Howell's expectations leave Duke Energy between a rock and a hard place. North Carolina regulators want a mid-July report on the bankruptcy's impact on the Lee Nuclear Station. The utility has an NRC license to build and operate two AP1000 reactors in Gaffney, South Carolina.
Gutierrez's speech also fell on the Wednesday the Santee Cooper board did not meet in executive session to discuss the bankruptcy. The South Carolina state utility has a 45 percent stake in the Summer Nuclear Plant Westinghouse is building near Jenkinsville, South Carolina, The other 55 percent is held by SCANA's South Carolina Electric and Gas.
Westinghouse stable, working to complete U.S. reactors
Westinghouse Electric is "very stable," chief executive Jose Gutierrez told the Nuclear Energy Assembly in his first public speech since the company’s late March Chapter 11 filing, expressing confidence the company will emerge from bankruptcy "quickly, better, stronger and more competitive."
Linking the bankruptcy to the "nuclear renaissance" that failed to materialize, Gutierrez told the annual Nuclear Energy Institute conference in Scottsdale, Arizona the company remains confident that AP1000 is "good technology."
Westinghouse is working with the owners of the Vogtle and Summer nuclear plants in Georgia and South Carolina “to find a long-term solution to complete those reactors,” Gutierrez said, adding the future of other new nuclear reactors being built in the U.S. likely depends on the completion of these reactors in the Southeast.
“We hope that those reactors get built. We hope they do a better job than we did,” he stated, adding it was important to note that the filing focused on the construction of the four reactors in the U.S. Southeast.
“As soon as (Southern and SCANA) decide if they continue, Westinghouse is going to be fully open to provide whatever type of services they want from us, except construction,” Gutierrez in a Bloomberg interview. These services could include engineering and procurement, instrumentation and controls, and fuel services.
The bankruptcy filing was a strategic move to "reset the financial footprint" of the company to address construction issues at U.S. projects, while protecting the company's core business, Gutierrez told the Assembly.
The problems that led to the Chapter 11 filing have nothing to do with the AP1000 technology, he said, noting reactors being built in China are proceeding well.
A combination of factors led to the issues prompting the bankruptcy declaration, the executive said.
The failed renaissance
The Vogtle and summer contracts were signed in 2008 in the context of an expected "nuclear renaissance" -- with up to 32 reactors under construction or contracted by 2030 -- which failed to materialize.
The company had to make significant redesigns to the reactors in response to requirements from the Nuclear Regulatory Commission after the September 2001 terrorist attacks and the 2011 Fukushima accident.
And the company - and the wider nuclear industry - did not anticipate the challenges and issues associated with a resumption of nuclear new-build in the U.S. 30 years after the country's last reactor construction project.
"A lack of appropriate infrastructure, knowledge and experience became a reality," Gutierrez said, citing the challenges of rebuilding the supply chain.
Away from the U.S. construction projects, Westinghouse was "very stable," its CEO said. The rest of Westinghouse's business remained strong.
Since the bankruptcy filing, Westinghouse has been awarded several fuel contracts, which demonstrated customers' confidence in the future of the company.
Westinghouse remains committed to its reactor design business and will pursue future sales, Gutierrez said, noting future opportunities in China, India, Turkey and the UK.
The company is working to develop a "more achievable delivery model" to reduce risk, he said, adding that future projects would adopt an approach more like that used in China, where four AP1000s are under construction.
A nuclear power plant south of Shanghai is expected to be the first to operate using the AP1000 technology. The Sanmen project in China’s Zhejiang province was scheduled to begin operation in 2013, but was delayed due to design problems, supply-chain bottlenecks and stricter safety measures after Japan’s Fukushima nuclear disaster
The Sanmen I is expected to begin fuel loading this summer along with the Haiyang 1.
Construction is not our forte
Westinghouse is planning for all of its global businesses to focus on engineering and procurement and other core services, and not offer construction services.
“Construction is not our forte, and we certainly have decided from a risk perspective, never to do that again,” David Howell, president of the Americas region, said in interview.
Similarly, Bloomberg reported, Gutierrez said the company plans to focus on its core business services, and expand globally in North and South America, and Eastern Europe.
“We are leaders in the fuel business, in many services businesses and obviously in different markets. The focus is going to be continue leading those segments, and even growing in other markets where our presence is not so significant,” he said.