Westinghouse hope to close bankruptcy proceedings by 2018

The much anticipated multi-billion dollar deal with the Toshiba-owned Westinghouse​ to construct 6 nuclear power units in India will have some clarity once the company closes its bankruptcy claim filed under Chapter 11 of the bankruptcy code and this is going to happen sometime in 2018. Speaking at the 9th Nuclear Energy Conclave, Vice President (India Projects) Westinghouse Electric Company KM Rajan spoke about the issue that has thrown the nuclear power plants deal into turbulence.

The Indian Government has been trying to salvage it as Prime Minister Narendra Modi sought reworking of the deal during his visit to the US earlier in 2017. The modalities of the reworked deal are still not clear but initial reports suggest that Westinghouse will take up consultation and design role, whereas construction will be done by an Indian partner.

The deal with the Westinghouse Electric Company, the US arm for Japan’s Toshiba, to build six nuclear reactors has already missed its deadline in June 2017. “We expect to be out of the bankruptcy Chapter 11 process sometimes mid-next year. We will be out of that, so it will not have any effect on the (project in India),” Rajan said during the conclave organised by the India Energy Forum in response to a question. Under the chapter 11 of the Bankruptcy code the company is allowed to do its business and clear debt over a period of time that also involves reorganization of the firm.

The $ 20 billion deal was undergoing advanced techno-commercial negotiations when it hit a roadblock as Westinghouse, a one-time market leader and American giant acquired by Toshiba in 2006, filed for bankruptcy in March this year. The deal is now said to have gone back to drawing board, as Westinghouse intend to wrap up its construction arm post the bankruptcy proceedings.

India has been closely watching the proceedings that started in March 2017 following an estimated overruns of $13 billion on two projects. This has been an ominous beginning of the year for the nuclear industry amidst plummeting prices of other renewable energy sources.

The now missed deadline for the deal was announced by Prime Minister Narendra Modi and former US President Barack Obama in 2016. A confident India had also allotted a site for a 2,500 MW nuclear power station in Gujarat and identified locations for 6 units in Andhra Pradesh.

Despite the uncertainty India and Westinghouse are continuing the negotiations with US’ Exim Bank for loan of around $8-9 billion to part-fund building of the reactors. The deal would have been first example of Indo-US collaboration in the field of nuclear power post a civil nuclear deal between the two countries.

Rajan also commented on the civil liability issue terming it a cause of concern, but at the same time added that the negotiations with the Indian public sector player – Nuclear Power Corporation of India – has not reached the level yet. “The Government of India has to put together an insurance product. We haven’t got to the point where insurance product has been completed. We also haven’t got to the commercial discussions…to the point where I can translate that in to a full insurance policy,” he added.

The Indian Civil Liability for Nuclear Damage Act, where the supplier has to be liable in case of an accident, has been a cause of worry for many foreign firms. Experts have also termed it a “monstrous” law that will impede the growth of Indian nuclear energy sector. They found hope in the Indian government’s ratification of the Convention on Supplementary Compensation for Nuclear Damage that puts the liability of paying compensation to the victims in case of an accident on the operator rather than the domestic or international nuclear suppliers.

Westinghouse is one of the two US companies selected for building nuclear power reactors in India following the 2008 India–United States Civil Nuclear Agreement. Its Indian partner has been the Nuclear Power Corporation of India Limited (NPCIL). The US-based firm has tried to assuage the apprehensions in India saying it is not abandoning the bids in the country.