The Shaw Group Inc. announced today its special purpose subsidiary, Nuclear Energy Holdings L.L.C., intends to exercise put options to sell its investment in Westinghouse back to Toshiba Corporation. Nuclear Energy Holdings received the put options in connection with its 2006 acquisition of 20 percent of the shares in the companies referred to as the Westinghouse Group.
The exercise of the Japanese yen-denominated put options prior to October 2012 requires the consent of the trustee acting on behalf of the bond holders of the yen-denominated bonds that were issued in connection with the funding of the acquisition of the Westinghouse shares. Since the acquisition, the yen-denominated debt has increased by approximately $600 million to a total of almost $1.7 billion.
If the necessary consents are obtained, Nuclear Energy Holdings formally will notify Toshiba in accordance with the terms of the put options, and the shares will transfer 90 days thereafter. The funds received must be applied toward the redemption of the bonds on the next scheduled interest payment date.
Under the terms of the put option agreements, if consent to redeem the bonds early is not granted, the put options will be exercised automatically on Oct. 6, 2012, for cash settlement on Jan. 4, 2013. Proceeds from the sale would be used to repay the bonds in full on their scheduled maturity date of March 15, 2013.
The put options require Toshiba to purchase the shares at a price equivalent to not less than 96.7 percent of the principal amount of the bonds. Nuclear Energy Holdings will fund up to the 3.3 percent shortfall of the principal amount of the bonds, which was approximately $55.4 million at Aug. 31, 2011. Shaw may recognize a non-operating gain once the put options are settled resulting principally from foreign exchange movements. At Aug. 31 exchange rates and assuming early exchange, the gain would have been approximately $545 million pre-tax. The actual gain or loss will be determined at settlement.
While the sale of Nuclear Energy Holdings’ investment in Westinghouse terminates the formal contractual arrangement between Shaw and Toshiba, Shaw looks to continue the successful global cooperation that Shaw, Westinghouse and Toshiba have demonstrated. Shaw and Westinghouse currently are under contract for six new AP1000 nuclear power units in the U.S., as well as four units under construction in China. In addition, Shaw has a contract for technical support services on an additional two-unit AP1000 project in China that follows the original units at Sanmen and Haiyang. This vast experience is unparalleled in the industry and positions Shaw for continued success in this field.
Shaw also expects to continue to work with Westinghouse on new AP1000 projects and with Toshiba on Advanced Boiling Water Reactor projects. The companies already have begun pre-proposal and study activities in anticipation of those projects.
“We firmly believe that exercising the put options is in the best interest of our shareholders and our future business opportunities. It will eliminate almost $1.7 billion of debt, further strengthening our balance sheet,” said J.M. Bernhard Jr., Shaw’s chairman, president and chief executive officer. “Toshiba, Westinghouse and Shaw have worked together successfully both in the U.S and China, and we look forward to continuing to work together. We remain committed to our role as a premier constructor of nuclear power plants.”