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INSIGHT-How two cutting edge U.S. nuclear projects bankrupted Westinghouse
May 2, 2017 / 5:02 AM / 7 months ago

INSIGHT-How two cutting edge U.S. nuclear projects bankrupted Westinghouse

    By Tom Hals and Emily Flitter
    WILMINGTON, Del./NEW YORK May 2 (Reuters) - In 2012,
construction of a Georgia nuclear power plant stalled for eight
months as engineers waited for the right signatures and
paperwork needed to ship a section of the plant from a factory
hundreds of miles away. 
    The delay, which a nuclear specialist monitoring the 
construction said was longer than the time required to make the
section, was emblematic of the problems that plagued
Westinghouse Electric Co as it tried an ambitious new approach
to building nuclear power plants.
    The approach - building pre-fabricated sections of the
plants before sending them to the construction sites for
assembly - was supposed to revolutionize the industry by making
it cheaper and safer to build nuclear plants.
    But Westinghouse miscalculated the time it would take, and
the possible pitfalls involved, in rolling out its innovative
AP1000 nuclear plants, according to a close examination by
Reuters of the projects.
    Those problems have led to an estimated $13 billion in cost
overruns and left in doubt the future of the two plants, the one
in Georgia and another in South Carolina.
    Overwhelmed by the costs of construction, Westinghouse filed
for bankruptcy on March 29, while its corporate parent, Japan's
Toshiba Corp         , is close to financial ruin            .
It has said that controls at Westinghouse were "insufficient."
    The miscalculations underscore the difficulties facing a
global industry that aims to build about 160 reactors and is
expected to generate around $740 billion in sales of equipment
in services in the coming decade, according to nuclear industry
trade groups.
    The sector's problems extend well beyond Westinghouse.
France's Areva is being restructured, in part due to delays and
huge cost overruns at a nuclear plant the company is building in
    Even though Westinghouse's approach of pre-fabricated plants
was untested, the company offered aggressive estimates of the
cost and time it would take to build its AP1000 plants in order
to win future business from U.S. utility companies. It also
misjudged regulatory hurdles and used a construction company
that lacked experience with the rigor and demands of nuclear
work, according to state and federal regulators' reports,
bankruptcy filings and interviews with current and former
    "Fundamentally, it was an experimental project but they were
under pressure to show it could be a commercially viable
project, so they grossly underestimated the time and the cost
and the difficulty," said Edwin Lyman, a senior scientist at the
Union of Concerned Scientists, who has written and testified
about the AP1000 design.
    Westinghouse spokeswoman Sarah Cassella said the company is
"committed to the AP1000 power plant technology", plans to
continue construction of AP1000 plants in China and expects to
bid for new plants in India and elsewhere. She declined to
comment on a detailed list of questions from Reuters.
    By early 2017, the Georgia and South Carolina plants were
supposed to be producing enough energy to power more than a half
a million homes and businesses. Instead, they stand
half-finished. (For a graphic see
    Southern Co       , which owns nearly half the Georgia
project, and SCANA Corp        , which owns a majority of the
South Carolina project, have said they are evaluating the plants
and could abandon the reactors altogether.
    "We will continue to take every action available to us to
hold Westinghouse and Toshiba accountable for their financial
responsibilities under the engineering, procurement and
construction agreement and the parent guarantee," Southern said
in a statement. A spokesman declined to elaborate.
    The projects suffered setbacks from the start. In one
instance, to prepare the Georgia plant for construction,
Westinghouse and its construction partner in 2009 began digging
out the foundation, removing 3.6 million cubic yards of dirt.
    But half of the backfill – the material used to fill the
excavated area - failed to meet regulatory approval, delaying
the project by at least six months, according to William Jacobs,
the nuclear specialist who monitored construction of the plant
for Georgia's utility regulator.
    He declined to be interviewed.
    But the source of the biggest delays can be traced to the
AP1000's innovative design and the challenges created by the
untested approach to manufacturing and building reactors,
according to more than a dozen interviews with former and
current Westinghouse employees, nuclear experts and regulators.
    Unlike previous nuclear reactors, the AP1000 would be built
from prefabricated parts; specialized workers at a factory would
churn out sections of the reactor that would be shipped to the
construction site for assembly. Westinghouse said in marketing
materials this method would standardize nuclear plant
    Westinghouse turned to Shaw Group Inc, which held a 20
percent stake in Westinghouse, to build sections for the
reactors at its factory in Lake Charles, Louisiana. There,
components for two reactors each in Georgia and South Carolina
would be manufactured.
    Seven months after work began in the May 2010, Shaw had
already conducted an internal review at the behest of the
Nuclear Regulatory Commission (NRC) to document problems it was
having producing components.
    In a letter to the NRC, Shaw's then-executive vice
president, Joseph Ernst, wrote: "The level and effectiveness of
management oversight of daily activities was determined to be
inadequate based on the quality of work."
    He laid out a laundry list of deficiencies ranging from
Shaw's inability to weed out incorrectly made parts to the way
it stored construction materials.
    Ernst did not respond to a phone call seeking comment.
    Over the next four years, regulatory and internal
inspections at Lake Charles would reveal a slew of problems
associated with the effort to construct modular parts to fit the
new Westinghouse design, NRC records show.
    When a sub-module was dropped and damaged, Shaw managers
ordered employees to cover up the incident; components were
labeled improperly; required tests were neglected; and some
parts' dimensions were wrong. The NRC detailed each one in
public violation notices.
    Then there was the missing and illegible paperwork.
    The section that was delayed more than eight months by
missing signatures would become one of 72 modules fused together
to hold nuclear fuel. The 2.2 million pound unit was installed
more than two years behind schedule.
    It was not until June 2015 that the Lake Charles facility
was building acceptable modules, according to a report by
Jacobs. By then, Shaw had been bought by Chicago Bridge & Iron
    Gentry Brann, a CB&I spokeswoman, said the company put the
Lake Charles plant under new management and installed new
procedures after the 2013 acquisition. She said Westinghouse was
to blame for subsequent delays, citing "several thousand"
technical and design changes made after work had already started
on various components.
    Westinghouse declined to comment.
    To some extent, Westinghouse also was hamstrung by the NRC,
which imposed stringent requirements for the new reactors. To
comply, Westinghouse made some design changes that were tiny
tweaks; others were larger.
    For instance, before the NRC would issue the utilities an
operating license for the Georgia plant, it demanded changes to
the design of the shield building, which protects against
radiation leaks. The regulator said the shield needed to be
strengthened to withstand a crash by a commercial jet, a safety
measure arising from the Sept. 11, 2001 attacks.
    The NRC issued the new standard in 2009, seven years after
Westinghouse had applied for approval of its design. The
company, in bankruptcy court filings, said the NRC's demand
created unanticipated engineering challenges.
    A spokesman for the NRC, Scott Burnell, said the changes
should not have come as a surprise, since the agency had been
talking about the stringent requirements for several years.
    Westinghouse changed its design to protect against a jet
crash, but at that point the NRC questioned whether the new
design could withstand tornadoes and earthquakes.
    Westinghouse finally met the requirements in 2011, according
to a report by Jacobs.
    By 2016 Westinghouse began to grasp the scope of its
dilemma, according to a document filed in its bankruptcy:
Finishing the two projects would require Westinghouse to spend
billions of dollars on labor, abandoning them would mean
billions in penalties.
    Westinghouse determined it could not afford either option.

 (Reporting by Tom Hals in Wilmington, Delaware; additional
reporting by Makiko Yamazaki in Tokyo; editing by Paul Thomasch)

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