Canada’s Brookfield to buy Westinghouse

8 January 2018

Canadian investment fund Brookfield (Brookfield Business Partners with institutional partners) said on 4 January that it is to acquire 100% of Westinghouse Electric Company from Toshiba Corporation for about $4.6bn. Westinghouse filed with the US courts for Chapter 11 bankruptcy protection in March 2017 in the face of severe financial difficulties.

The purchase price covers "substantially all" of Westinghouse's global business and its affiliated debtors and debtors-in-possession. The deal includes Westinghouse’s business in Europe, the Middle East and Africa, which had remained outside of bankruptcy protection.

Brookfield Business Partners is part of Toronto-headquartered Brookfield Asset Management, a global alternative asset manager with over $265bn of assets under management, including $141bn in the USA.

Brookfield said it had signed a letter of intent to purchase Westinghouse's global businesses, to be paid with $1bn in equity and $3bn in long-term debt financing, and the balance by the assumption of certain pension, environmental and other operating obligations. It expects the deal to close in the third quarter of 2018, subject to bankruptcy court approval and other conditions including regulatory approvals. Throughout the process, Westinghouse will continue to operate in the ordinary course of business under its existing senior management, the company said.

The deal does not include the company’s most significant US projects – plans to construct a total of four AP1000 reactors at  Vogtle in Georgia, and VC Summer in South Carolina. It was those projects, plagued by delays and cost overruns, that eventually led the Chapter 11 bankruptcy through which Westinghouse sought to distance itself from any obligations to them. Toshiba has since paid $3.68bn in parental guarantees to the owners of the Vogtle 3&4 and agreed to pay up to $2.168bn to the owners of the Summer project. Construction has continued uninterrupted at Vogtle (co-owned by Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities), with Southern Nuclear taking over as the project manager at the site and Bechtel managing construction. The owners of the Summer project (Scana subsidiary South Carolina Electric & Gas and Santee Cooper) have stopped development.

Toshiba acquired Westinghouse in 2006 for more than $5bn, but the anticipated nuclear renaissance was not realised with oil and renewable energy costs falling and growing safety concerns following the 2011 Fukushima Daiichi disaster. Since filing for bankruptcy, Westinghouse said it planned to get out of the business of building new reactors and focus on servicing them, including decommissioning work.

José Emeterio Gutiérrez, Westinghouse president and CEO, said Brookfield's acquisition reaffirmed the Westinghouse's position as the leader of the global nuclear industry. "Our transformation and strategic restructuring process are creating a stronger, stable, and more streamlined global Westinghouse business, for the benefit of our customers and employees."

Four other teams had also shown interest in Westinghouse. Blackstone Group LP and Apollo Global Management LLC had put together a competing bid for Westinghouse Electric and as did Cerebus Capital Management LP, according to Bloomberg. Purchasing Westinghouse will give Brookfield, which primarily invests in the real estate, infrastructure and energy fields, a foothold in nuclear power as demand for it expands overseas. Under Brookfield, Westinghouse could team up with other manufacturers in the nuclear sector to compete on the international market with other major suppliers such as Russia, France, South Korea and China.

Westinghouse is the first foray into the nuclear sector for Brookfield.

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