Major Loss By Toshiba Rattles Nuclear Sector

The Japanese company took a $6.3 billion writedown to its U.S. nuclear unit on Feb. 14 and announced several executive changes, including the resignation of Shigenori Shiga as representative executive officer to take management responsibility for the loss.

Business news organizations' websites lit up Feb. 14 with the news that Toshiba has taken a $6.3 billion writedown to its U.S. nuclear unit and made several executive changes, including the resignation of Chairman Shigenori Shiga as representative executive officer to take management responsibility for the loss. The company's Westinghouse Electric Company (WEC) unit is the engineering, procurement, and construction contractor working on the construction of two new nuclear power plants with AP1000 reactors for South Carolina Electric & Gas Company (SCE&G) in Jenkinsville, S.C., and also is building two for Georgia Power Company (owned by Southern Company) near Waynesboro, Ga.

These plants, with their WEC contracts dating to 2008, have been hailed as the first new nuclear power facilities being built in the United States in 30 years. Toshiba, however, had warned investors last month that it would announce goodwill impairment associated with the nuclear construction projects in the United States, and its Feb. 14 announcements said the figures contained in it are not final and fully audited numbers will be issued March 14, after Japanese authorities allowed the company more time to file.

SCE&G is the primary subsidiary of SCANA Corporation, which announced that it will discuss the situation during its Feb. 16 earnings call and "will take into account the relevant information disclosed by Toshiba" on Feb. 14.

According to Toshiba, there were design changes and additional safety measures required to comply with aircraft crash protection in the plants' design, and design changes delayed the combined license's issuance until January 2012. Another year passed before the first concrete was poured, its announcement says. The plants' cost has risen by $6.1 billion, with labor costs accounting for $3.7 billion of that, procurement costs accounting for $1.8 billion, and contingency costs accounting for $600 million.

Now, Toshiba is establishing a new structure, with a Nuclear Business Corporate Oversight Committee chaired by its CEO and Toshiba executive officers serving as members of the committee. "Positioning the nuclear power business directly under the control of the present and CEO will give Toshiba corporate direct involvement in the nuclear energy business and its risk management," the announcement document states.

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