Toshiba's US nuclear power unit throws in the towel
Toshiba has filed for bankruptcy protection for its ailing nuclear power unit Westinghouse Electric in a move that could cost the tech giant billions of dollars to implement.
Toshiba could file for Chapter 11 bankruptcy in the US as early as Tuesday this week, which would start the proceedings and help Toshiba stem the financial damage being caused by the unit.
According to local media Nikkei, Toshiba's Westinghouse will meet with US utilities and shareholders on Monday to discuss the move, made more complicated due to the existence of two nuclear power plant projects already underway -- but falling behind schedule.
It is expected that Toshiba's board of directors will approve the Chapter 11 filing, and should the plan go ahead, Toshiba will be able to cut its losses but impairment charges related to the nuclear power unit could increase to around one trillion yen ($9 billion) from roughly $6.28 billion already on the books because of the plant construction services company.
Westinghouse was originally valued at $5.4 billion when acquired by Toshiba in 2006. At the time, Toshiba said the buyout would "herald the dawn of a new era for nuclear energy," but since then, Westinghouse has hemorrhaged money.
Toshiba has already warned that Westinghouse will likely be responsible for the hefty charges, which has caused the company to spiral into serious financial difficulty.
As noted by Reuters, the two delayed Westinghouse US nuclear plant projects have plagued Toshiba, already causing the Minato, Tokyo-based firm to spin off its memory chip business, with SK Hynix, Taiwan's Foxconn, and private equity fund Silver Lake already lining up to snap up part or all of the valuable asset.
The NAND memory business makes up the better part of Toshiba's operating profit, and the decision to sell the unit highlights just how much of a disaster the Westinghouse acquisition has been.
The precarious financial position of Toshiba also led to the resignation of the firm's chairman, Shigenori Shiga, back in February.
"Whether or not Westinghouse files for Chapter 11 is ultimately a decision for its board, and must take into account the various interests of all of its stakeholders, including Toshiba and its creditors," Toshiba said in a statement.
Toshiba's main creditors are Sumitomo Mitsui Banking Corp and Mizuho Bank, and Korea Electric Power group has reportedly been approached as a sponsor for the reorganization of Westinghouse after the Chapter 11 filing has been approved.
The tech giant has missed two earnings deadlines due to the problems at Westinghouse. If the latest application for an extension is denied, Toshiba will be forced to quickly submit its financial reports or face delisting, as reported by the Financial Times.
Over the past few years, the Japanese company has been involved in a major restructuring effort after overstating its profit by $2 billion over the course of seven years. The reshuffle resulted in thousands of employees being let go and the sale of the Toshiba PC business.