We’ve known for weeks that Toshiba was in rough shape and seeking
to raise additional revenue through a potential partial sale to
Western Digital, but events on Tuesday pushed the company’s position
from “really bad” to “implosion imminent.”
Today,
Toshiba announced that it would take a $6.2 billion write-down
on the value of its nuclear plant construction business. Toshiba
acquired a majority stake in Westinghouse Electric Company in 2006,
and later upped its share of the company to 87% in 2013. Toshiba
paid $5.4 billion for the company in 2006 and an additional $1.6
billion in 2013. In 2015, Toshiba declared its nuclear business was
more profitable now than when the company acquired it, but scandals
over the Japanese firm’s accounting broke soon thereafter.
Westinghouse is far from the only nuclear engineering firm that
Toshiba owns, but it’s near the heart of this scandal. In 2015,
Westinghouse bought an American construction company, CB&I Stone &
Webster. Toshiba now says that Westinghouse overpaid for the company
and that information material to the acquisition — specifically cost
overruns, delays, and the impact both would have on CB&I Stone &
Webster’s bottom line — were not disclosed properly or accounted
for.
The AP1000 reactor being installed at Sanmen China.
Toshiba also announced today that it would take a $3.4 billion
loss (estimated) due to cost overruns at multiple key nuclear
projects, and that it would review all of its agreements with
existing power companies to expand nuclear capability across the
globe. Toshiba plans to pivot towards emphasizing existing service
contracts as opposed to bidding on nuclear plant construction
projects, though it does still hope to sell some of its AP1000
reactors. The AP1000 is a pressurized water reactor, and the latest
design from Westinghouse has deployments scheduled to come online
this year in Sanmen, China. This deployment is running 2-3 years
late, which may be part of why Toshiba is taking such heavy losses.
In England, Toshiba’s announcement that it would withdraw from
nuclear construction contracts outside of Japan hasn’t played well.
Toshiba owns 60% of the firm NuGen, which was to construct a new
generating station at Moorside
in Cumbria. Now, Toshiba is looking to sell its stake in the
company to Korea Electric Power, though it noted it would still be
interested in selling the AP1000 reactors if conditions were right.
Fallout
Shigenori Shiga, Toshiba’s chairman, has announced he will step
down on Wednesday to take responsibility for the company’s
performance, but that’s scarcely going to slow things down. Toshiba
has requested another 30 days to prepare its financial and quarterly
statements for the Tokyo Stock Exchange. Its stock value has fallen
by more than 50% since December 14.
Current expectations are that Toshiba will have no choice but to
file for bankruptcy, sell a significant amount of assets, and
attempt to survive that way. Given the fallout of these events, you
might be wondering why Toshiba doesn’t just sell its nuclear
business — but
according to The New York Times, it’s had no
luck finding a buyer. Last month, the firm announced it would
spin off its microchip business, with an estimated value of $13
billion to $17 billion if Toshiba sold its entire stake. That would
pay off the company’s immediate debts, but would leave it holding
the bag on an incredibly expensive, underwhelming nuclear business
with no prospects for near-term improvement.
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