Vogtle delays, cost overruns cause problems for Toshiba
Toshiba, the Japanese conglomerate which acquired Westinghouse Electric Company some 10 years ago, announced Tuesday that its chairman, Shigenori Shiga, would resign after the company announced more than $6 billion in losses from its nuclear construction operations.
In 2015, Westinghouse acquired CB&I Stone & Webster, the primary contractor for Plant Vogtle’s Units 3 and 4. The New York Times reported Tuesday that Toshiba’s auditors have determined Westinghouse had paid too much for the company. “Delays and cost overruns at the projects (Plant Vogtle and Virgil C. Summer near Jenkinsville, S.C.) mean that CB&I Stone & Webster was saddled with potential liabilities for which Westinghouse had failed to account,” the report stated. The report also said that the two projects are “about three years behind schedule and billions of dollars over budget.”
Craig Bell, spokesman for Georgia Power, principle owner of Plant Vogtle, said Tuesday, “We continue to monitor the financial position of Toshiba, which is the guarantor for Westinghouse under our engineering, procurement and construction (EPC) agreement. Under this agreement, Westinghouse (the primary contractor for the Vogtle expansion) has taken the actions required in connection with Toshiba’s fi- nancial condition.”
Bell added, “The EPC agreement continues to protect Georgia Power customers through its firm and fixed nature and we expect the contractor to employ all possible means to meet the current schedule targets for Vogtle Units 3 and 4. In addition, the project owners currently possess $920 million in letters of credit consistent with the terms of the agreement. While we cannot speculate on what may happen in the future with Toshiba or Westinghouse and their overall business, we will always hold them, as the contractor, accountable for their responsibilities under our agreement.”
Construction craft at Vogtle Units 3 and 4 say the Toshiba announcement comes as no surprise. “This isn’t the first time we have been juggled around,” one source said. “Everyone knows [Toshiba] lost themselves, not just here but around the world. They have trusted companies like Fluor on cost plus contracts and not monitored or had good oversight on their contractors. The problem with milestone driven payouts is that too much attention is given to the milestone and not enough to the support services. It happened with CB&I. It’s like putting up a gate to block a road and then not attaching a fence to keep things from going around the gate. Whoever is in charge of these projects needs to be an active participant.”
Toshiba bought Westinghouse in 2006 when the nuclear power industry in this country was being revived. The permits for Vogtle 3 and 4 were the first to be issued since 1979.
Satoshi Tsunakawa, the company president, told The New York Times that Toshiba had purchased CB&I Stone & Webster “in the hope that, by integrating the contractor’s operations with its own, it could improve efficiency and reduce the cost overruns in the two projects.” But, the Times reported the savings never materialized and Westinghouse had to cover even more of the costs that would have been borne by CB&I Stone & Webster.
The value of Toshiba’s stock was down about 8 percent Tuesday and has dropped by half since it warned about the loss from Westinghouse in December.