BRADENTON, Fla. – U.S. nuclear contractor Westinghouse Electric Co. reportedly could file for bankruptcy this week, casting new doubt on municipal bonds for plants under construction in Georgia and South Carolina.
Toshiba Corp. has informed its main lenders that it is planning for Westinghouse to file a Chapter 11 petition as early as Friday, according to Reuters, which cited "people briefed on the matter" who declined to be identified.
Reuters also said that Toshiba would not comment on the report.
"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 provided to Reuters.
The latest troubling news about the contractor building new units at Plant Vogtle in Georgia and V.C. Summer in South Carolina comes after S&P Global Ratings placed negative outlooks on all public power provider bonds issued for the projects on Thursday.
Fitch Ratings and Moody's Investors Service previously placed negative outlooks on the public power providers they rate due to the billions in losses that Toshiba is expected to incur because of exposure to Westinghouse's debts.
S&P said it revised its outlooks to negative from stable on the two largest public power agencies with debt for the nuclear projects - Municipal Electric Authority of Georgia and the South Carolina Public Service Authority, also called Santee Cooper - as well as others entities with ownership stakes or power purchase agreements.
The outlook revisions reflect extensive construction delays and cost overruns that might saddle the utilities with financial burdens that could negatively affect their ratings, S&P analysts said in separate reports Thursday.
"Although fixed-price contracts between the utilities developing the nuclear units and the construction contractor, Westinghouse Electric Co. LLC, have been shielding the utilities from the brunt of the cost overruns, the burdens of the projects' sizable budgetary mismatches are rapidly degrading the financial condition of Westinghouse and its parent Toshiba Corp.," S&P analysts said.
If Westinghouse cannot complete the projects, MEAG and Santee Cooper could lose the benefits of the fixed-price contracts, they said, adding that the financial difficulties Toshiba and Westinghouse face create uncertainty about the contractor's capacity to complete the project.
"It is becoming increasingly unclear whether Toshiba has the financial capacity to guarantee the financial obligations of its subsidiary, Westinghouse, particularly because of our view of the difficulties its faces in accessing debt and equity markets," the analysts said. "At this time, the utilities participating in the plant are unable to quantify the costs of completing the project if Westinghouse defaults on its construction contract obligations."
S&P also said that it is unclear whether the utilities will complete the projects if Westinghouse defaults, which could leave them responsible for servicing debt issued for the nuclear projects and the costs of building or securing replacement generation capacity.
Smaller agencies that S&P also placed negative outlooks on due to ownership stakes or power purchase agreements include Oglethorpe Power Corp. in Georgia, Central Electric Power Cooperative Inc. in South Carolina, and PowerSouth Energy Cooperative in Alabama.
S&P revised its outlook to stable from positive on JEA of north Florida, a larger public utility with a power purchase agreement obligating it to buy 206 megawatts of energy over 20 years from MEAG.