Toshiba Corp's Westinghouse Electric Company is to pay $229m to buy Chicago Bridge & Iron Co's (CB&I's) Stone & Webster nuclear construction business in return for the delivery of some equipment and the completion of two US projects - Southern Co's Vogtle NPP in Georgia and Scana Corp's VC Summer complex in South Carolina. Westinghouse is currently constructing eight AP1000 pressurized water reactors - four in the US (two each at Vogtle and VC Summer) and four in China - with CB&I Stone & Webster as its consortium partner.
The deal represents a shift for CB&I away from large-scale nuclear power projects and is expected to resolve disputes between CB&I and Westinghouse on the one hand and Southern and Scana on the other, over who should pay for the cost overruns of the NPP projects. Westinghouse will take over the construction and start-up of Vogtle and VC Summer, both years behind schedule. The deal should be completed by December.
Southern Co has agreed to pay $350m as part of a settlement related to the deal, "significantly less" than contractor claims in litigation over the Vogtle project, a company statement said. Scana and Santee Cooper reached their own settlement with the contractors which will raise Scana's costs of the VC Summer project by about $286m. Scana said in its filing that the completion dates for its two nuclear units at VC Summer may be delayed another two months from a schedule approved by state regulators in September. Unit 2 is now projected to be finished by August 2019, and unit 3 by August 2020, the company said.
CB&I President and CEO Philip K Asherman said the deal offers "a single focus of responsibility and accountability for the completion" of the nuclear units and "provides clarity and increased predictability from our growing backlog of work in markets that are more strategic to our future growth". CB&I, formally based in the Netherlands, reported more than $2bn in 2014 revenues from its nuclear business. Apart from projects in China, CB&I has expressed some concerns about the lack of new nuclear projects on the drawing board.
CB&I will receive $161m million upon the substantial completion of pending projects and the remaining $68m once milestones are reached on equipment and services on a subcontract basis. CB&I said it will incur a $1-1.2bn impairment charge on the deal, of which $904m will be recorded in the third quarter. CB&I said it expects to report $164m in adjusted net income for the quarter, which is a slight gain from $162m last year.
The agreement excludes CB&I's fossil power generation capability, its nuclear and industrial maintenance business, the mixed-oxide nuclear fuel conversion project at Savannah River, the Federal decommissioning business, and the NetPower programme for the development of power generation plants with zero CO2 emissions from the deal. Westinghouse will assume full responsibility for all AP1000 nuclear projects and the nuclear integrated services business, but CB&I will continue to supply discrete scopes of modules, fabricated pipe, and specialty services for the US nuclear projects on a subcontract basis.
CB&I first acquired the Stone and Webster nuclear construction business as part of its $3bn acquisition of The Shaw Group in 2012. Shaw bought Stone & Webster at auction for $150m after the company was financially crippled by an Indonesian bribery scandal. The business was built up and Technip purchased the Stone & Webster process technologies division from Shaw in early 2012.
"This transition is a positive development for all stakeholders in the current nuclear projects as it provides, through Westinghouse, a single focus of responsibility and accountability for the completion of the AP1000 (nuclear reactor) units," said Asherman in a prepared statement. CB&I said it will focus its growth on liquefied natural gas, petrochemicals and fossil fuel power construction projects.
A Westinghouse statement said the deal supports its expansion into the business of nuclear decontamination and enhances its management and environmental offerings. Westinghouse will assume CB&I's project operations and assets, including contracts in the US and China.
After the transaction closes Westinghouse and its affiliates would become the sole contractor over both the Vogtle and VC Summer construction projects. However, Westinghouse said it is negotiating with Irving-based Fluor Corp as its nuclear construction partner for the future.
According to Fluor, the company "will be providing project execution and direction, accountability for and management of professional staff and craft personnel, and a focus on safety, quality and project delivery certainty."
Fluor will begin work immediately under a professional services agreement to assess the two projects, engaging the workforce and planning a transition of duties and responsibilities required to develop appropriate plans to manage plant construction. Fluor and Westinghouse have further agreed that Fluor's scope will complete project construction at these facilities on a cost reimbursable basis, without liability for pre-existing conditions associated with prior construction.