Toshiba asks financial firms to help with UK nuclear project cost -sources

[December 10, 2015]    By Kentaro Hamada and Taro Fuse

TOKYO (Reuters) - Toshiba Corp <6502.T> is asking Japanese financial institutions to help fund a nuclear project in northwest England, sources with direct knowledge of the matter said, as the conglomerate seeks ways to ease its financial burden after a $1.3 billion accounting scandal.

Toshiba holds a 60 percent stake in the NuGen UK nuclear joint venture with France's Engie <ENGIE.PA>, and plans to provide three of its Westinghouse AP1000 reactors for the Moorside project to be built near the Sellafield nuclear site in west Cumbria.

While financing plans have yet to be formally drawn up, the scandal has made it more difficult for Toshiba to take on its planned share of the building costs by itself, the sources said, adding that they estimate its share of those costs at more than $2 billion.

Tapping domestic financial institutions for help in funding an overseas nuclear project is a rare move for a Japanese nuclear company, underscoring the financial impact of the scandal.

In overseas nuclear reactor projects, it is common for the main company in charge to foot around 10 percent of the total cost, which it usually does either on its own or in partnership with other nuclear power firms.

"It has become difficult for Toshiba to do this on its own," said one of the sources. The sources said the conglomerate had made requests to Japanese insurers as well as some banks including Norinchukin Bank [NORB.UL], and has hired HSBC <HSBA.L> as a financial adviser.

A Toshiba spokeswoman declined to comment, while NuGen and Norinchukin officials were not immediately available for comment. The sources declined to be identified as they were not authorized to speak to the media on the matter.

Toshiba's stock has fallen about 40 percent since news of its accounting problems began to emerge in early April.

Japan's securities watchdog recommended on Monday that Toshiba be fined a record 7.37 billion yen ($60.5 million) for overstating profits. It is also being sued by shareholders over damages brought about by stock losses.

Moreover, investors have said the scandal and subsequent restatements highlighted weaknesses in a wide range of Toshiba's businesses, which also include PC and TV manufacturing operations.

After restating earnings results going back to fiscal 2008/09, Toshiba booked a loss of 90.5 billion yen for the six months ended September 30. It ended the period with 383 billion yen in cash and cash equivalents, helped by the sale of assets such as its stake in Finnish elevator maker Kone <KNEBV.HE>.

Toshiba has not formally announced cost projections for the 3.4 gigawatt Moorside project that is part of Britain's plan to replace its ageing fleet of nuclear reactors and polluting coal plants.

The move also comes after France's EDF <EDF.PA> secured a deal with Chinese nuclear company CGN to help it finance the Hinkley Point nuclear project, Britain's first new nuclear plant for over 20 years.

Company sources have previously said that until two years ago Toshiba had estimated a total cost of 1.5 trillion yen ($12.4 billion) for the NuGen project. But industry analysts now believe the cost could be roughly double that due to higher-than-expected labor costs and stricter safety standards.

Financing plans for the project are not due to be finalised until 2018. The first of the three reactors is slated to begin operations in 2024.

($1 = 121.4400 yen)

(Additional reporting by Makiko Yamazaki; Writing by Ritsuko Ando; Editing by Edwina Gibbs and Muralikumar Anantharaman)

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