Toshiba Corp. has entered final preparations for Westinghouse Electric Corp.to apply for Chapter 11 bankruptcy this month, it is now considering a sale.
Toshiba is reported to have asked South Korea's Korea Electric Power Corp (KEPCO) to sponsor the bankruptcy reorganization of Westinghouse.
Unlike Westinghouse and France's Areva, whose new third-generation reactor models have faced years of delays and big cost overruns, KEPCO has managed to build its reactors overseas on time and to budget.
Toshiba hopes that Westinghouse can secure sufficient funds to continue its construction of nuclear power facilities even after the start of bankruptcy protection procedures. More pressingly, domestic uncertainty after the impeachment of South Korea's president has made it tougher to secure political backing for a risky nuclear deal.
Any filing would trigger complex negotiations between Toshiba and creditors, and could embroil the U.S and Japanese governments given the scale of the collapse and US state loan guarantees for new reactors.
Westinghouse's envisioned pursuit of support from the South Korean public utility firm may not proceed smoothly, as Seoul may shift its pro-nuclear power policy in the event of a victory by Moon Jae-in in the country's upcoming presidential election in May.
Toshiba previously warned it was on track to report a net loss of 390 billion yen ($3.5 billion) in the fiscal year to March, as it faced a writedown topping 700 billion yen at Westinghouse, which has been hit by big cost overruns.
While a Chapter 11 filing for Westinghouse would be done by the USA unit's board and would not require approval by Toshiba's shareholders, a filing on the same day or directly before or after will increase the chances of contentious shareholder gathering.
The move would limit future liabilities from the unit. Earlier this year, the company indicated regrets over purchasing Westinghouse. Almost two years later, it is still not finalized.