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Apple might save Toshiba, and so help build New Nuclear Plants

Will Apple’s Overseas Billions Help Westinghouse Complete New Nuclear Plants?, Forbes, Rod Adams ,  15 Apr 17  A Friday report from NHK, Japan’s public broadcasting company, announced that Apple might join Foxconn in a coordinated bid for a majority stake in Toshiba, the world’s second largest supplier of flash memory chips. None of the companies involved has confirmed the report…..

Apple Has Some Of the World’s Deepest Pockets

As of the end of December 2016, Apple reported a cash balance of $241 billion with 94% of it – $230 billion – overseas. It has continued to add to that growing pile of cash overseas mainly because it has not paid U.S. corporate taxes on the related earnings. Repatriating it under current provisions in the tax code would require a large payment to the federal government…..

Overseas Investments Logically Escape U.S. Taxman

Like any well-managed company, Apple is not counting on the government making any changes to current law. It’s logical to believe that the company might be seriously investigating the possibility of direct investments or acquisitions in companies that are headquartered outside the U. S…….

Direct overseas investments would deploy the cash pile into a use that might be more lucrative than collecting the tiny amounts of interest currently paid to all savers, including large, successful corporations.

Apple has a long standing working relationship with Toshiba and most likely has a number of fans within Toshiba. In 2005, during the exciting stages of the iPod era, Apple made a long term purchase commitment – which came with a substantial cash advance – that enabled Toshiba and other flash memory suppliers to make the investments that have led to a technological revolution and a reliably profitable business segment.

Both Apple and Toshiba have profited from the relationship over the years. In 2011, Apple stopped buying flash memory from Samsung, indicating that its components no longer met the company’s evolving requirements as it improved its products. That decision shifted more sales volume to Toshiba…….

How Would This Investment Help Electricity Customers In Georgia And South Carolina?

Several years ago Toshiba, as Westinghouse’s large, profitable and then stable parent company, provided substantial guarantees in the case of cost overruns for both the Vogtle and Summer projects. Each of those projects, one in Georgia and one in South Carolina involves the construction of two of Westinghouse’s flagship AP1000 nuclear power plants. According to recent document filings, the total amount of Toshiba’s guarantees is about $4 billion.

Toshiba would like to complete the projects and successfully demonstrate the value of the AP1000 technology. Even though the company has indicated that it no longer wants to be in the nuclear plant construction business, it is still very interested in being a part of the nuclear power plant engineering, manufacturing, fuel supply, and services business. That business line will have a much greater potential for future profits after the first units begin operating.

Both Southern Company’s Georgia Power unit and SCANA, as the lead utilities in each consortium building the power plants, are in an evaluation phase to determine if the plants can and should be finished…..

neither of the state utility regulators will allow project completion if the costs seem prohibitive and if the burden of the cost overruns places an excessive burden on their electricity customers.

Though the cost overrun guarantee from Toshiba will apparently survive the Westinghouse bankruptcy, it may end up near the end of the creditor line if Toshiba itself must seek bankruptcy protection…..


April 17, 2017 - Posted by | business and costs, Japan, USA

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