Nuclear power plants help ignite Toshiba's meltdown

Toshiba Corp., one of Japan's oldest and largest multinational conglomerates, is on the verge of bankruptcy, revealing the real problem with nuclear power plants: They cost too much.

Toshiba revealed last month that it will likely post a $4.4 billion loss because its U.S. subsidiary, Westinghouse Electric, has written off $6.3 billion from work on four new nuclear reactors in Waynesboro, Georgia and Fairfield County, South Carolina.

The Georgia plant is three years behind scheduled and $3 billion over budget. The South Carolina reactors are several years behind schedules and $2.4 billion over budget.

Toshiba's stock price has fallen from 475.20 yen a share in December to a recent low of 178 yen. Ratings agencies have slashed Toshiba's credit ratings and warn of an imminent default on the company's bonds because there are likely more budget over-runs ahead at both facilities.

"The current financial strain on Westinghouse and Toshiba could lead to higher completion costs and further delays," Fitch Rating Service reported.

And the Japanese government is in no mood to bail Toshiba out.

"Fiscal pressure rose last week as the Japanese government said it was not considering supporting Toshiba and the company missed, for the second time, a reporting deadline for its audited third quarter results," the Fitch note added. "Its application to delay its results until April 11 was approved, but it remains at risk of being de-listed for failure to meet the requirements of the Tokyo Stock Exchange."

Analysts at Standard & Poor's were no less pessimistic.

"Absent unanticipated, significantly favorable changes in the issuer's circumstances, we see a rising likelihood Toshiba will become unable to fulfill its financial obligations in a timely manner or will undertake a debt restructuring we classify as distressed in the next six months," S&P wrote.

The Georgia and South Carolina plants were supposed to prove that nuclear power is viable in the United States. Westinghouse touts the AP1000 PWR reactor as the most advanced available based on licensed technology.

The nuclear energy industry is lobbying governments around the world to build more plants because they release no greenhouse gases and supply a steady supply of energy no matter the weather conditions. When it comes to operating costs, nuclear power is cheap.

The capital expenses, though, are huge. And if it weren't for a regulated electricity market, there is no way these two nuclear power plants could compete with natural gas, wind and coal in a competitive electricity market like we have in Texas.

Reports emerged Tuesday that Toshiba is considering a prepackaged  bankruptcy with Westinghouse's creditors. The $500 million deal would keep Westinghouse operating until the debt is restructured.

This follows on the heels of reports that Toshiba wants out of the nuclear business altogether.

There are over 60 nuclear reactors under construction around the world. In many places they will make economic sense, while in others, they are government vanity projects.

As attractive as it might seem, though, new nuclear power plants still haven't shown that they're economic in the United States, and the dire status of Toshiba and Westinghouse is proof.