Brookfield Business Partners to Acquire Westinghouse from Toshiba Corp.

Westinghouse Electric Co., a company that is emerging from a bankruptcy stemming from the half-built AP1000 reactor projects in Georgia and South Carolina, is to be acquired from Toshiba Corp. by business services and industrials company Brookfield Business Partners.

Brookfield, a company of Toronto-headquartered Brookfield Asset Management, announced on January 4 that it entered into an agreement to acquire 100% of the Cranberry Township, Pennsylvania—based firm from the Japanese conglomerate in a transaction of about $4.6 billion. Brookfield expects to fund the acquisition with about $1 billion of equity, approximately $3 billion of long-term debt financing, and the balance by assuming certain pension, environmental, and other operating obligations.

The deal is expected to close in the third quarter of 2018, but it must first clear approval from bankruptcy court, regulatory entities, and other closing conditions.

“Brookfield’s acquisition of Westinghouse reaffirms our position as the leader of the global nuclear industry,” said Westinghouse President and CEO José Emeterio Gutiérrez in a statement on January 4. “Our transformation and strategic restructuring process is creating a stronger, stable, and more streamlined global Westinghouse business, for the benefit of our customers and employees.”

A New Chapter in a Storied Legacy

The acquisition marks a new chapter for Westinghouse, a company with a storied legacy and solid reputation as an industrial powerhouse.

The U.S. company got its start in 1886 (about four years after the publication of POWER‘s first issue). It was founded by George Westinghouse, whose penchant for invention yielded a transformer that proved to be the key to widespread distribution of electric power.

Westinghouse Electric Co. has since steadily bagged a number of power “firsts.” In 1957, it supplied the world’s first commercial pressurized water reactor to the now-decommissioned Shippingport Atomic Power Station in Pennsylvania. About 60 years later, more than 430 nuclear power reactors based on Westinghouse designs are operational worldwide, including at 60% of U.S. nuclear power plants.

But in the 1990s, more than a century after its founding, the company was forced to reinvent itself after a series of financial setbacks. It moved to buy broadcasting company CBS and a number of other broadcasting ventures, renaming itself CBS Corp. in 1997. That year, it also sold its non-nuclear power generation business to German giant Siemens AG.

In 2006, Toshiba Corp. purchased Westinghouse for $5.6 billion in a deal made as the U.S. nuclear sector prepared for a “renaissance” promised by passage of the 2005 Energy Policy Act. The law gave nuclear developers a tax credit package, loan guarantees, and cost-overrun protections.

In 2008, Westinghouse inked deals to build four reactors, two for Southern Corp. at Plant Vogtle in Georgia and two for SCANA Corp. in South Carolina, and regulators moved to approve the nation’s first new nuclear reactors since the 1979 accident at Three Mile Island.

A Corporate Revitalization

However, on March 29, 2017, Westinghouse filed for voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code, seeking to undertake “a strategic restructuring as a result of certain financial and construction challenges in its U.S. AP1000 power plant projects.” (For more, see “How Westinghouse, Symbol of U.S. Nuclear Power, Collapsed.”)

The company’s financial distress, owing to spiraling cost overruns at projects to build new flagship AP1000 reactors at Plant Vogtle in Georgia and Virgil C. Summer Nuclear Station in South Carolina, proved costly for Toshiba, too. Toshiba, roiled by accounting scandals of its own, last February reported it would write off more than $6 billion and withdraw from the business of building new nuclear power plants altogether.

To firm up its financials and prime Westinghouse for a new buyer, Toshiba has since paid $3.6 billion in parental guarantees to the owners of the Vogtle project. It has also agreed to pay up to $2.17 billion to the owners of the V.C. Summer project.

For Westinghouse, which has 11,000 employees worldwide, the acquisition could be the boon it needs to transform its business. The company has been taking steps toward revitalization. In December, it celebrated the “debut” of Stone & Webster, a company it bought in 2016 from CB&I (which merged with McDermott International this December), saying the 1889-founded engineering firm had “reemerged” as an “industry leader.” The rebranded company will focus on non-nuclear power generation projects.

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)