Picture: ISTOCK
Picture: ISTOCK

New York/Tokyo — Little more than a year after flagging multibillion-dollar write-downs that threatened its very survival, Toshiba has gained some closure with the sale of its former nuclear unit, Westinghouse Electric.

Westinghouse was put into bankruptcy by Toshiba in March after project delays crippled earnings from the nuclear plant business. On Thursday, Brookfield Business Partners agreed to buy what remains of its US business out of bankruptcy, as well as its nonbankrupt European business, for $4.6bn.

Toshiba bought Westinghouse for $5.4bn in 2006 as a way to diversify away from consumer electronics, but struggled to build new reactors and was wrong-footed by changes in the nuclear industry. That includes the effect of Japan’s 2011 Fukushima meltdown and a flood of cheap natural gas in the US.

While it’s unclear what benefit the Tokyo-based company will see from a sale, it will help Toshiba move on in the eyes of investors.

"In terms of its image, this is a positive. Westinghouse has been a ghost that haunted Toshiba for a long time, so to be rid of that can be interpreted as positive," said Masahiko Ishino, an analyst at Tokai Tokyo Securities. "But in terms of Toshiba’s fundamentals you can’t say this has much impact."

Shares of Toshiba rose 2.2% to ¥330 in Tokyo on Friday. The company posted a net loss of ¥966bn (R106.3bn) last fiscal year, largely on the effect of the Westinghouse debacle.

"The decision on the buyer for Westinghouse is good news for all creditors, including ourselves," Toshiba spokesman Ryoji Shinohara said. "We believe the recovery of Westinghouse will move forward through the US bankruptcy court proceedings."

Changed business

Westinghouse is the first foray into the nuclear sector for Brookfield. The company has a plan to reorganise the bankrupt US assets, according to a person with knowledge of the sale. The deal, which still needs court and regulatory approval, was reached on Wednesday night, said the person, speaking on condition of anonymity because some details are not yet public.

"Brookfield’s acquisition of Westinghouse reaffirms our position as the leader of the global nuclear industry," said Westinghouse CEO Jose Emeterio Gutierrez. He said the deal would transform the company into a stronger, more streamlined business.

Since filing for bankruptcy in March, Westinghouse has said it will no longer take on the risk of building new atomic facilities, and will instead specialise in servicing reactors and selling designs.

The deal includes Westinghouse’s business in Europe, the Middle East and Africa, which had remained outside of bankruptcy protection, while at the same time drawing on some of the financing the bankrupt units obtained from Apollo Global Management.

Westinghouse had harboured hopes of up-ending the industry with the AP1000 reactor, which was developed to be safer than reactors of old. The design was supposed to revive an industry plagued by the accident at Three Mile Island in 1979. Instead, delays and overruns led to troubles that left Toshiba fighting for survival in 2017 after writing down the value of the unit by billions.