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Concerns emerge over guarantee for Toshiba’s U.S. nuclear project

Kyodo

Concerns about a potential burden on American taxpayers have emerged as Toshiba Corp. is considering the option of a Chapter 11 bankruptcy for its troubled U.S. nuclear unit Westinghouse Electric Co., according to sources close to the matter.

With the U.S. government having guaranteed an $8.3 billion debt over a nuclear power plant project in Georgia contracted to Westinghouse, the company’s restructuring under Chapter 11 may force U.S. taxpayers to shoulder part of the cost, the sources said Thursday.

In 2012, the U.S. government guaranteed loans to local utilities for the construction of two nuclear reactors at the Vogtle nuclear power plant in Georgia. The construction is being undertaken by Westinghouse.

Toshiba is considering seeking several hundred billion yen in additional loans from banks to prepare for a possible increase in the construction cost for Westinghouse’s projects in Georgia and South Carolina, according to other sources.

Toshiba said last month it is expecting a loss of ¥712.5 billion ($6.20 billion) in the April-December period, due to delays and cost overruns at its four nuclear power plants under construction, including the two at the Vogtle plant.

Japan’s Economy, Trade and Industry Minister Hiroshige Seko plans to make a trip to the United States during which he may discuss the Westinghouse issue with a high-level U.S. official in charge of energy.

On Wednesday, Reuters news agency reported that Westinghouse has hired bankruptcy attorneys. Citing sources, Reuters said no decision had yet been taken about filing for bankruptcy.

Meanwhile, Toshiba could once again push back the release — scheduled for next week — of its financial results for the April-December period, sources close to the matter said Thursday. Toshiba already missed a deadline last month, citing a need to examine alleged “inappropriate pressure” by some of Westinghouse’s management.

The chances of Toshiba announcing its financial earnings on Tuesday are “50-50,” according to the sources. “We cannot say for sure that it will be released (on the 14th),” one source said.

U.S. and Japanese auditing firms have been divided over whether former Westinghouse President Danny Roderick and other executives allegedly pressuring subordinates to understate losses on a nuclear project has impacted the company’s earnings, the sources said.

While Japanese lawyers and auditing firms doubt that the alleged harassment has had a negative effect on the company’s earnings, the opinions of U.S. auditors, who disagree, are likely to carry weight, given that the issue concerns the subsidiary based in the United States.

Toshiba management’s competency has been called into question since an accounting scandal came to light in 2015, delaying the release twice of its annual results for fiscal 2014.

The sources also said Thursday that Toshiba plans to sell smart meter firm Landis+Gyr AG, a Swiss subsidiary, for more than ¥200 billion as soon as this fall as part of restructuring steps to cover losses of its U.S. nuclear business.

Toshiba bought the smart meter firm with the state-backed Innovation Network Corporation of Japan in 2011 for roughly ¥186 billion.

For the plan to go ahead, Toshiba needs to coordinate with the INCJ as the state-backed fund owns a 40 percent stake.