Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17
Bitcoin Hits New All-Time High Above $5,000 As Lagarde Concedes Defeat and Jamie Demon Shuts Up - 13th Oct 17
Golden Age for GOLD, Dark Age for the Stock Market - 13th Oct 17
The Struggle for Bolivia Is About to Begin - 13th Oct 17
3 Reasons to Take Your Invoicing Process Mobile - 13th Oct 17
What Happens When Amey Fells All of a Streets Trees (Sheffield Tree Fellings) - Video - 13th Oct 17
Stock Market Charts Show Smart Money And Dumb Money Are Moving In Opposite Directions—Here’s Why - 12th Oct 17
Your Pension Is a Lie: There’s $210 Trillion of Liabilities Our Government Can’t Fulfill - 12th Oct 17
Two Highly Recommended Books from Bob Prechter - 12th Oct 17
Turning Point Nations On The Stage - 11th Oct 17
The Profoundly Personal Impact Of The National Debt On Our Retirements - 11th Oct 17
Gold and Silver Report – Several Interesting Charts - 10th Oct 17
London House Prices Are Falling – Time to Buckle Up - 10th Oct 17
The S&P Is A Bloated Corpse - 10th Oct 17
Are Gold and the US Dollar Rallying Together? - 10th Oct 17
Is Silver Turning? - 9th Oct 17
Bitcoin Needs Electricity, Gold CONDUCTS Electricity - 9th Oct 17
S&P 500 At Record High But Will Stocks Continue Even Higher? - 9th Oct 17
Gold and Silver on Major Buy Signal, The Cycle is Up - 9th Oct 17
How To Fight Corruption in the Philippines - 9th Oct 17
Stock Market Bulls Still in Charge - 9th Oct 17
DiEM25: Europe Without Nations or Religion - 9th Oct 17
Gold Price Readying to Rally - 8th Oct 17
Gold Price in Q3 2017 - 8th Oct 17
PassMark Bench Mark of OVERCLOCKERS UK Custom Built Gaming PC (5) - 8th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

What A Westinghouse Bankruptcy Could Mean For U.S. Utilities

Companies / US Utilities Mar 28, 2017 - 12:32 PM GMT

By: OilPrice_Com

Companies

International news services now report that Japan’s Toshiba Corporation (9502.T) is preparing to make a chapter 11 bankruptcy filing for its Westinghouse Electric subsidiary as soon as this Monday, March 27. For most of our readers this news evokes little surprise. This is merely another chapter of a slow moving financial and accounting train wreck involving nuclear design and construction firm Westinghouse and its troubled Japanese parent, Toshiba. But like an old, leaky garbage scow there is much to clean up in its wake.


The two U.S. utilities with the most at risk are Southern Company and SCANA Corp. Westinghouse is presently constructing two unit, AP 1000 nuclear power stations for each utility. These projects are over-budget and behind schedule. It appears that Westinghouse offered both utilities a fixed price contract for these new nuclear plants. Our best guess is that this fixed price construction guarantee has doomed Westinghouse and prevented other potentially willing buyers from stepping in. No one it seems is willing to take on this seemingly open-ended nuclear construction liability.

What does this mean for the two domestic utilities embroiled in this international financial quagmire?

First, we expect that they will complete both nuclear construction projects. The bulk of heavy capital expenditures for both utilities seem to be in the 2017-2019 period.

Second, it is in all interest of all potential litigants to see these plants completed. Westinghouse/Toshiba, for one, would at least get to showcase the AP 1000 design and its successor entity could advocate for additional sales of this reactor design. A working design has value. (What happens in the UK is another matter where Toshiba hoped to build several plants). The utilities, which need new power stations, get large, rate based, non-fossil base load power generating resources for the next 40-60 years.

The worst case scenario for utility investors would be if the utilities had to cancel the projects and take big write offs. But we assign a very low probability to this scenario.

Perhaps, more likely, a Westinghouse bankruptcy means abrogation of the fixed price contracts signed with Southern and SCANA. News reports this week indicated that both utilities had hired bankruptcy counsel.

As these plants are brought on line, presumably in the 2020-2021 time frame, the matter will go before the state utility commissions of Georgia and South Carolina. Both commissions approved these nuclear projects. It’s just that the plants will cost more than expected.

Unfortunately for investors, they will have to live with uncertainty until the regulators make their decisions. There are no clear precedents for the decisions, other than that commissions typically allocate or split unexpected financial burdens like these between shareholders and consumers. And that the amounts at risk won’t be modest given the size of the projects.

Link to original article: http://oilprice.com/Latest-Energy-News/World-News/What-A-Westinghouse-Bankruptcy-Could-Mean-For-US-Utilities5507.html

By Leonard Hyman and Bill Tilles for Oilprice.com

© 2017 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife