Toshiba May Go Bankrupt as Result of Nuclear Investments

It would appear that Toshiba has purchased a very complex radioactive black-hole that may bankrupt it.

The takeover of Webster & Stone by by Toshiba‘s subsidiary Westinghouse may go down in history as one of the worst investments ever made, and it all centers around nuclear power.

Ultimately Toshiba is left holding the bag for a huge construction backlog of nuclear power plants, 46 at present count, and none of them may ever be completed.

On top of the issues surrounding the construction of the nuclear plants, it seems as though senior management at Toshiba has been cooking the books. Their former auditing firm Ernst and Young was recently fined for helping them record more than 300 million dollars in fictitious profits.

A recent Toshiba earnings call was scuttled because their current auditor wouldn’t sign off on the necessary documents, but the unofficial figure for their losses so far is in excess of 6 billion dollars.

What Happened?

The details of this financial catastrophe are nuanced, but they all revolve around the difficulty that new nuclear power projects are facing.

Toshiba is struggling with delays in both China and the United States, their projects are facing many questions that don’t seem to have easy answers.

While their AP-1000 reactor was supposed to be able to be built reliably, clearly there are some pretty major problems. Some of Toshiba’s clients claim that the design was woefully incomplete, and that Toshiba acted irresponsibly by accepting their orders.

There will be plenty of work for an army of well paid lawyers, I am sure.

But Toshiba isn’t alone in the land of nuclear woe. French mega-nuclear corporation Areva was recently bailed out by the Government of France to the tune of 5.3 billion dollars.

The US nuclear operator Entergy has announced plans to dump nuclear power from its business, turning its back on some profit making generation facilities, their Indian Point facility included.

Not An Easy Sell

Nuclear power isn’t the miracle that it once was thought to be. Many of the original reactor designs were severely flawed, and the public has woken up to the danger inherent in them.

It’s nearly impossible to paper over a Chernobyl or Fukushima, no matter how good at “spin” you are.

At present there are just 2 nuclear power plants operating in Japan, despite having 42.

The Reason?

Public outcry after the Fukushima disaster.

Vietnam has two reactor projects on hold, and if public sentiment doesn’t change they will never resume work on them.

People simply don’t want to face the danger of having a major radioactive disaster in their country.

I don’t blame them, no one wants a giant radioactive explosion near their home.

In addition to the obvious risk that nuclear energy poses, it’s really expensive and time consuming to build the generators.

The reactor design that is destroying Toshiba has never really been built, and no one seems to know how to make it work in real life. The man in charge of the whole division has never built a nuclear this reactor before, and this has led to some issues.

The delays are costly, most of the materials that are used to make a nuclear power plant are specialized, and the scrap value is low to nonexistent.

With all of those factors put against the background of a public that is violently opposed to the construction of new nuclear plants, Toshiba’s nuclear program ends up looking like a pretty awful business model.

A Few Changes

While many of these reactors have been struggling to get off the ground, there have been some major changes in the economics of wind and solar generation.

In the latest round of offshore wind farm development companies like Vattenfall and Royal Dutch Shell have been able to bid as low as 5 euro cents per kWh, and still make money at those levels.

While green energy used to look like a power source that had to be subsidized, now it seems like one of the best options going forward. The power it produces is economically viable, and there is no risk of toxic explosions.

Solar power is still more expensive than wind generation in most cases, but the overall price is competitive with most fossil fuels. Especially when the pollution is taken into consideration, solar power is just getting better all the time.

The Base Generation Objection Is Baseless

For a long time one of the biggest arguments against sustainable energy generation was that solar and wind don’t create base load. While this is true, the battery technology that exists makes this objection largely irrelevant.

Another angle to all of this is the aging and sometimes poor quality of the electrical infrastructure in the United States. In many areas a major series of overhauls is necessary, and the inclusion of battery systems would make a lot of sense, even without bringing renewable generation into the equation.

A New Way To Profit

With the new economies that are developing in power generation major companies are making some changes that seemed impossible just a decade ago. When we look at a technology like coal fueled power generation, we must admit that burning dirty rocks is an archaic, dangerous and increasingly expensive proposition.

There are few proponents left for nuclear power, and the economics of actually building a reactor are nightmarish. The public is almost universally opposed to using the existing reactors we have, and building new ones is probably never going to regain public acceptance.

A string of recent economic successes have shown that wind power does the job. The rates that it can deliver power at are extremely competitive, and we have to remember that this is a fledgling industry.

Ultimately green power will succeed because it is economically viable, and much, much safer than the traditional alternatives.

Toshiba’s nuclear nightmare serves as a warning to entrenched industry; embrace changes or be wiped out.

Companies like Vattenfall will reap the rewards of early action, let’s all hope that there are others that see the incredible opportunity that green power presents.

[via zerohedge]