Southern's Georgia Power Objects to Westinghouse Bankruptcy Loan -- Update
Georgia Power Co. has taken issue with Westinghouse Electric Co.'s proposed $800 million bankruptcy loan, saying the financing could threaten the construction of the first new nuclear reactors to be built in the U.S. in decades.
Westinghouse filed for chapter 11 bankruptcy at the end of March and wants to borrow money to keep its other businesses healthy, while it contends with the fallout of nuclear construction projects that are years behind schedule and billions of dollars over budget.
With a Friday deadline looming for Georgia Power to decide whether to continue construction at the Vogtle Electric Generating Plant, it and other plant owners are protesting Westinghouse's efforts to pledge intellectual property as collateral for the loan deal.
If Westinghouse's bankruptcy loan goes through as planned, the company's lenders would be in position to "foreclose on the intellectual property, which could seriously disrupt or even potentially halt construction," lawyers for Georgia Power, the largest subsidiary of Southern Co., warned in a court filing.
Westinghouse's bankruptcy financing is coming from affiliates of Apollo Global Management LLC. The loan deal officially takes a "hands-off" approach to assets at Vogtle and at the South Carolina site where new reactors are being built, the Virgil C. Summer Nuclear Generating Station, which is owned mostly by South Carolina Electric & Gas Co., a Scana Corp. subsidiary.
Lawyers for Georgia Power, however, say provisions in the loan could allow Westinghouse's lenders to claim intellectual property needed to finish construction and safely operate the plant. That is true even though none of the money in the bankruptcy finance package can be used on reactor construction, the utility's lawyers said.
Based on Westinghouse's AP1000 nuclear power plant design, the new Vogtle reactors are the first of what is supposed to be a new generation of commercial nuclear plants to be built in the U.S.
A spokeswoman for Westinghouse couldn't immediately be reached Thursday to respond to the objection from Georgia Power. Approved on a preliminary basis, the bankruptcy loan was supposed to be up for final approval this week, but Westinghouse has pushed back the court hearing until May 10.
Georgia Power's objection to the massive bankruptcy loan is the first flexing of major creditor muscle in a chapter 11 proceeding that has serious implications for Westinghouse parent Toshiba Corp., as well as for utility operators in the southern U.S. states where Westinghouse has been building reactors. Georgia Power is counting on the new reactors to power 400,000 homes and businesses in the state.
Toshiba has written down billions due to delays and cost overruns from the construction and pushed Westinghouse into bankruptcy to exit the nuclear business and cut its losses. It's up to the plant owners to decide whether or not to finish the new nuclear reactors being built in Georgia and South Carolina.
Owners of the Vogtle plant have been paying $5.4 million a week to continue construction under an agreement struck with Westinghouse before it filed for bankruptcy March 29, court papers say. By Friday, Georgia Power is supposed to decide whether to extend the agreement, which is keeping thousands of people on the job while the fate of the reactor construction project is decided.
No decision has been made yet, lawyers for Georgia Power said in papers filed Wednesday evening in the U.S. Bankruptcy Court for the Southern District of New York. However, if the Vogtle plant owners do decide to forge ahead, they want unfettered access to the intellectual property, and they don't want interference from Westinghouse's lenders.
Along with the troubled nuclear construction unit, Westinghouse has healthy, global business lines providing fuel and services to power plants. Sold or taken over by creditors under a bankruptcy plan, the profitable Westinghouse businesses, and, potentially, the intellectual property will be a major source of value for creditors. Westinghouse is borrowing to support those businesses.
U.S. Commerce Secretary Wilbur Ross told The Wall Street Journal this week that the fate of Westinghouse's nuclear business is a matter of national security. Asked if he would consider using public funds to assist Westinghouse, Mr. Ross said he believed the company's bankruptcy funding was "adequate" for the immediate future. Any change to the financing, however, could change that assessment.
Georgia Power's lawyers say the bankruptcy financing should be tweaked to allow lenders to claim a share of the proceeds if the intellectual property is sold, but prevent them from claiming rights that jeopardize the construction projects.
--Jacob M. Schlesinger contributed to this article.
Write to Peg Brickley at email@example.com
(END) Dow Jones Newswires
April 27, 2017 10:02 ET (14:02 GMT)