With the failure of Westinghouse, the future of American nuclear power looks even bleaker. (JEFF FUSCO/Getty Images)
Summary
In any given year, a handful of companies file for Chapter 11 bankruptcy in the United States. Rarely, however, does one of these filings reverberate beyond the boardroom and into the realm of geopolitics. Those that do — Lehman Brothers in 2008, or the “Big Three” U.S. automakers in 2008-10 — usually involve hundreds of billions of dollars. But the next big geopolitically relevant bankruptcy may be on the horizon, and the amount of money involved is tiny next to the collapses of the past decade.
Analysis
On March 29, Westinghouse Electric Co., a subsidiary of Japanese conglomerate Toshiba (TOSBF), filed for bankruptcy. The U.S.-based nuclear power company has been building two state-of-the-art nuclear power plants in Georgia and South Carolina, but it has been plagued by delays and cost overruns. The filing sent Toshiba scrambling to cut its losses by March 31, the end of Japan’s fiscal year. The Japanese conglomerate ended up writing down over $6 billion on its nuclear reactor business. But Toshiba’s troubles don’t end there; the firm is also working to sell off a portion of its chip manufacturing holdings.
The U.S. government is worried about what the sale of Westinghouse could mean for the future of traditional nuclear power in the United States and for nuclear power in China, which is keen to learn the secrets of a Western firm such as Westinghouse. The Japanese government, meanwhile, is wary of how Beijing could benefit in the long term, should a Chinese firm acquire Toshiba’s semiconductor unit.
A Setback for the Nuclear Renaissance
Even though the current and previous U.S. administrations have supported nuclear energy — and the first new reactor in the United States in two decades started last October — the future of traditional American nuclear power is not bright. High capital costs, climbing operating costs, sustained low natural gas prices and unfavorable electricity markets all limit its expansion. And with the failure of Westinghouse — one of the two major nuclear power firms in the country (the other, GE, is also scaling back its plans) — the picture looks even bleaker.
