Toshiba Plunges on Massive Nuclear Writedown, Earnings Delay

Toshiba shares fell 8 percent on Tuesday as the company took a US$6.3 billion writedown related to its struggling nuclear power business and delayed the release of its fiscal third-quarter earnings.

Shigenori Shiga, Toshiba’s chairman and representative executive officer, resigned effective Wednesday, the company said. His resignation in part reflects management taking responsibility for the loss of goodwill and the impairment related to Westinghouse’s acquisition of CB&I Stone & Webster from the Chicago Bridge & Iron Co. N.V.

Shiga will remain an executive officer of the firm until the June shareholders meeting and will focus on resolving issues related to Westinghouse.

Nuclear Meltdown

Westinghouse, which was acquired by Toshiba in 2006, acquired CB&I Stone & Webster in 2015 for $229 million. CB&I Stone & Webster was involved in construction at two U.S. nuclear facilities — the Alvin W. Vogtle Electric Generating Plant near Waynesboro, Georgia, and the Virgil C. Summer Nuclear Generating Station, near Jenkinsville, South Carolina — plagued by long delays and massive cost overruns.

“For future projects, Westinghouse will seek out qualified companies for the construction scope of new plant projects, as we have done in the past, with Westinghouse offering engineering and procurement services,” Sarah Cassella, spokesperson for Westinghouse Electric Co., told the E-Commerce Times.

Regulators have approved Toshiba’s request to delay the submission of its fiscal third quarter earnings report, for the quarter ending December 31, until March 14, as the purchase price allocation process for Westinghouse’s acquisition of CB&I Stone & Webster was found to be inadequate.

Toshiba’s audit committee hired the law firm of Nishimura & Asahi, while Westinghouse hired the firm of K&L Gates to assist in the process.

Westinghouse managers late last month expressed concern that senior management was exerting pressure on the PPA process, Toshiba said.

Lawyers from both firms have been conducting interviews.

Down Ballot Effect

The problems at the nuclear facilities will create long-term pressure on Toshiba’s electronics and computer businesses, suggested Jim McGregor, principal analyst at Tirias Research.

“With the energy group accounting for the largest portion of Toshiba’s revenues, this has a potential impact on all other segments, including electronic devices and components,” he told the E-Commerce Times.

Toshiba likely will have to sell or spin off other business units, McGregor said, noting that the company already is planning to shed its flash memory business.

“The problems at Toshiba could eventually lead to the breakup of the company completely,” he remarked.

“At this time, we are aware of the situation, but we have nothing to act on,” said Bill Edge, spokesperson for the Georgia Public Service Commission.

The commission expects Georgia Power to file its next construction monitoring report on the Vogtle plant by the end of February, he told the E-Commerce Times.

Hearings are held on the progress of the project every six months.

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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