Declaration of Lisa J. Donahue Pursuant to Rule 1007-2 of the Local Bankruptcy Rules for the Southern District of New York (related document(s) 1 ) filed by Robert J. Lemons on behalf of WEC Carolina Energy Solutions, Inc.. (Lemons, Robert) (Entered: 03/29/2017)
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WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Gary T. Holtzer
Robert J. Lemons
Garrett A. Fail
TOGUT, SEGAL & SEGAL LLP
One Penn Plaza, Suite 3335
New York, New York 10119
Telephone: (212) 594-5000
Facsimile: (212) 967-4258
Albert Togut
Brian F. Moore
Kyle J. Ortiz
Proposed Attorneys for Debtors
and Debtors in Possession
Proposed Attorneys for Debtor
Toshiba Nuclear Energy Holdings (UK) Ltd.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------x
In re
:
:
WESTINGHOUSE ELECTRIC
:
COMPANY LLC, et al.,
:
:
Debtors. 1
:
--------------------------------------------------------x
Chapter 11
Case No. 17-_____ (___)
(Joint Administration Pending)
DECLARATION OF LISA J. DONAHUE PURSUANT TO RULE 1007-2 OF THE
LOCAL BANKRUPTCY RULES FOR THE SOUTHERN DISTRICT OF NEW YORK
I, Lisa J. Donahue, pursuant to section 1746 of title 28 of the United States Code,
hereby declare that the following is true to the best of my knowledge, information, and belief:
1.
I am a Managing Director and the Leader of the Global Turnaround
and Restructuring Group at AlixPartners LLC (âAlixPartnersâ), where I have been since 2001.
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtorâs federal tax identification
number, if any, are: Westinghouse Electric Company LLC (0933), CE Nuclear Power International, Inc. (8833),
Fauske and Associates LLC (8538), Field Services, LLC (2550), Nuclear Technology Solutions LLC (1921), PaR
Nuclear Holding Co., Inc. (7944), PaR Nuclear, Inc. (6586), PCI Energy Services LLC (9100), Shaw Global
Services, LLC (0436), Shaw Nuclear Services, Inc. (6250), Stone & Webster Asia Inc. (1348), Stone & Webster
Construction Inc. (1673), Stone & Webster International Inc. (1586), Stone & Webster Services LLC (5448),
Toshiba Nuclear Energy Holdings (UK) Limited (2348), TSB Nuclear Energy Services Inc. (2348), WEC Carolina
Energy Solutions, Inc. (8735), WEC Carolina Energy Solutions, LLC (2002), WEC Engineering Services Inc.
(6759), WEC Equipment & Machining Solutions, LLC (3135), WEC Specialty LLC (N/A), WEC Welding and
Machining, LLC (8771), WECTEC Contractors Inc. (4168), WECTEC Global Project Services Inc. (8572),
WECTEC LLC (6222), WECTEC Staffing Services LLC (4135), Westinghouse Energy Systems LLC (0328),
Westinghouse Industry Products International Company LLC (3909), Westinghouse International Technology LLC
(N/A), and Westinghouse Technology Licensing Company LLC (5961). The Debtorsâ principal offices are located
at 1000 Westinghouse Drive, Cranberry Township, Pennsylvania 16066.
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I have been working with the Company to address its liquidity concerns and implement cost
savings since December 2016. On March 8, 2017, I was retained by the Debtors to be their
Chief Transition and Development Officer. I have performed similar roles for other debtors in
large, complex chapter 11 cases, including, among others, acting as Chief Restructuring Officer
of Puerto Rico Electric Power Authority; acting as executive vice president and Chief Financial
Officer of Calpine Corporation; Chief Restructuring Officer of SemGroup, LP; and Chief
Financial Officer and Chief Restructuring Officer at Exide Technologies Inc.
2.
I am generally familiar with the Debtorsâ day-to-day operations,
business and financial affairs, and books and records.
I submit this declaration (this
âDeclarationâ) to assist the Court and parties-in-interest in understanding the circumstances that
compelled the commencement of these chapter 11 cases and in support of: (a) the Debtorsâ
petitions for relief under chapter 11 of title 11 of the United States Code (the âBankruptcy
Codeâ) filed on the date hereof (the âPetition Dateâ); and (b) the emergency relief that the
Debtors have requested from the Court pursuant to the motions and applications described herein
(collectively, the âFirst Day Motionsâ).
3.
Except as otherwise indicated, the facts set forth in this Declaration are
based upon my personal knowledge, my review of relevant documents, my discussion with the
members of the Debtorsâ senior management, information provided to me by the team working
under my supervision or the Debtorsâ professional advisors, Weil, Gotshal & Manges LLP
(âWeilâ) as legal restructuring counsel and PJT Partners, Inc. (âPJTâ) as investment banker, or
my opinion based upon my experience and knowledge. If called upon to testify, I would testify
competently to the facts set forth in this Declaration. I am authorized to submit this Declaration
on behalf of the Debtors.
2
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I.
Overview2
4.
Formed as the nuclear power subdivision of one of the great names in
American manufacturingâWestinghouse Electric Corporationâthe Debtors and their nonDebtor affiliates (collectively, âWestinghouseâ or the âCompanyâ) operate a global business
that provides its products and services to customers worldwide. Westinghouse provides design
and engineering services, decommissioning services, and a variety of other critical operations to
both new plant construction as well as the existing operating fleet of nuclear power plants. Due
to the world-class quality and breadth of the nuclear products and services Westinghouse
provides, the Company serves more than half of the nuclear power plants in the world.
5.
Despite the Debtorsâ recent financial troubles, the majority of the
Debtorsâ businessesâparticularly those relating to nuclear fuel and the servicing of nuclear
plantsâare very profitable. Westinghouseâs uninterrupted supply of these goods and services is
necessary for the continuous and safe operation of more than half of the nuclear plants in the
world, and particularly those in the United States and Europe. The Debtors will use these
chapter 11 cases to reorganize around their profitable Core Businesses and isolate them from the
one specific area of their businesses that is losing money: their construction of nuclear power
plants in Georgia and South Carolina. The Debtors will use the protections and tools afforded by
the Bankruptcy Code to resolve their issues with the U.S. construction projects and reorganize
around their Core Businesses to emerge from bankruptcy as a healthy, well-capitalized company
capable of continuing Westinghouseâs proud history as an icon of American ingenuity.
2
Capitalized terms used but not defined in this section shall have the meaning subsequently ascribed to them in this
Declaration.
3
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6.
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As described in more detail below, the Debtorsâ need to avail
themselves of the protections of the Bankruptcy Code arises primarily from a series of
unforeseen challenges that significantly delayed and increased the cost of construction of the
nuclear plants in Georgia and South Carolina (referred to as Vogtle and VC Summer,
respectively). These challenges potentially expose the Debtors to billions of dollars either in (i)
cost overruns to complete the projects or (ii) penalties and liabilities if they abandon the projects.
The Debtors cannot afford either option. Notwithstanding that the Debtorsâ other businesses are
profitable and world-class, the Construction Business cost increases have led to a liquidity crisis
that the Debtors can only solve in chapter 11.
7.
During the chapter 11 cases, the breathing spell afforded by the
automatic stay, the significant liquidity from the Debtorsâ committed postpetition financing, and
the credit support from the Debtorsâ majority owner, Toshiba, will permit the Debtors to protect
their Core Businesses and operate them with both minimal disruption and the same record of
safety and quality that made the Debtors global leaders in the nuclear power sector. The Debtors
will also be able to use the liquidity from their postpetition financing to provide funding needed
by their many foreign Non-Debtor Affiliates, whose operations are integral to the Debtorsâ Core
Businesses, to continue to operate in the ordinary course outside of any insolvency proceedings.
8.
Concurrently, the Debtors will use their chapter 11 cases as the forum
to resolve their difficulties that stem from the construction cost increases at Vogtle and VC
Summer. Pursuant to short-term agreements with the Owners of Vogtle and VC Summer, the
Debtors and the Owners will explore the continued feasibility of those projects in a manner that
is cost-neutral and cash-neutral to the Debtors.
The ultimate resolution of the Debtorsâ
involvement in these projects remains uncertain, but the Debtorsâ chapter 11 cases will remove
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the threat that the construction cost increases pose to the Debtorsâ ability to operate their Core
Businesses.
9.
The Debtors have formulated their strategy to minimize any negative
impact of these chapter 11 cases to their Core Businesses in the United States and the rest of the
world.
The Debtors and their Non-Debtor Affiliates will continue without interruption or
disruption to provide their customers around the world with unparalleled nuclear components
and services. The Debtors will move purposefully in these chapter 11 cases to resolve their
construction issues with Vogtle and VC Summer, reorganize around their Core Businesses and
maximize their value, and emerge from chapter 11 as a healthy and profitable company that
remains at the forefront of the global nuclear power industry.
II.
Background
10.
The Companyâs history dates back to the very dawn of the atomic
power era, when Westinghouse designed and supplied the worldâs first full-scale, commercial
pressurized water reactor (a âPWRâ) in 1957 in Shippingport, Pennsylvania. Sixty years later,
there are more than 430 nuclear power reactors in operation worldwide, with an aggregate net
installed capacity of 370,543 MWe,3 accounting for approximately 10% of electricity generation
worldwide. Remarkably, technology designed by Westinghouse is at the heart of approximately
50% of the worldâs commercial nuclear reactors, giving the Company the worldâs largest
installed base of operating nuclear power plants.
11.
Westinghouseâs presence is even more pronounced in the United
States, where it has offices in 14 states. As of December 1, 2016, there were 99 operating
3
MWe stands for megawatt electrical, a measurement for the electric power produced by a generator. A 1,000
MWe reactor running at 90% capacity provides enough electricity to supply approximately 720,000 U.S. households
on average.
5
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nuclear reactors at 61 nuclear power plants in the United States.4 Westinghouse technology is
used in 60% of these power plants.5 Since 1990, the share of total annual U.S. electricity
generation provided by nuclear power has averaged about 20%. Further, Westinghouse is the
original equipment manufacturer (âOEMâ) for nuclear reactor technology for 61 out of the 99
licensed commercial nuclear reactors in the U.S. and 111 out of the 450 operable licensed
commercial nuclear reactors worldwide.
A.
Corporate Organization6
12.
Westinghouse is divided into two sibling chains of corporate entities:
(i) a chain of U.S.-domiciled entities that are directly and indirectly owned by Debtor
Westinghouse Electric Company LLC (âWECâ, and together with its direct and indirect
subsidiaries, âWEC U.S.â), a Delaware limited liability company; and (ii) a chain of entities in
the rest of the world (âWEC EMEAâ) that are directly and indirectly owned by Debtor Toshiba
Nuclear Energy Holdings (UK) Limited (âTNEH UKâ), a holding company registered in
England and Wales whose only assets in the United States are funds held in New York, New
York. The Company has a total of 61 offices all over the globe, including 37 offices outside of
the United States. As of the Petition Date, Toshiba Corporation (âToshibaâ) indirectly owns
87% of WEC, Japanese conglomerate IHI Corporation (âIHIâ) indirectly owns 3%, and the
remaining 10% of WEC is indirectly owned by Kazakhstanâs National Atomic Company
Kazatomprom JSC (âKazatompromâ). Toshiba, IHI, and Kazatomprom also directly own the
same percentages of TNEH UK.
4
A power plant may contain nuclear as well as non-nuclear electricity generating units. Each nuclear reactor
located at a commercial nuclear power plant is unique and has its own personnel and equipment. The reactor
provides heat to make steam, which drives a turbine and, in turn, drives the generator that produces electricity.
5
U.S. Energy Information Administration, available at https://www.eia.gov/tools/faqs/faq.php?id=104&t=3.
6
See Exhibit A, Organization Chart, for additional information regarding the Companyâs corporate structure.
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WEC, TSB Nuclear Energy Services Inc. (âTNESIâ), TNEH UK, and
all of the wholly-owned WEC U.S. entities other than Westinghouse Government Services LLC
and Wesdyne International LLC (together, the âWEC U.S. Non-Filersâ)7 are Debtors in these
chapter 11 cases. None of the WEC EMEA entities, other than TNEH UK, is a Debtor in these
chapter 11 cases, and none is subject to any other insolvency proceedings (together with the
WEC U.S. Non-Filers, the âNon-Debtor Affiliatesâ).
14.
The WEC U.S. and WEC EMEA entities depend heavily on one
another for business support relating to operations, intellectual property, credit support and
guarantees. The Company operates its complex businesses by business line on a geographically
consolidated basis. As such, WEC U.S. and WEC EMEA are a synergistic and operationally
integrated nuclear power company.
15.
In certain business lines, like the operating plant business (âOPBâ or
the âOperating Plant Businessâ), various Westinghouse entities in the U.S. and globally share
equipment and professionals, depending on the services and licensing required. These entities
also rely on one another to service customersâWEC EMEA typically relies on WEC U.S. for
spare parts and engineers while WEC U.S. regularly utilizes WEC EMEA engineers for design
and construction of new tooling. Additionally, WEC EMEA relies on the WEC U.S. entities for
a number of corporate functions, including the provision of information technologies (including
computer servers and third party products and licenses) and insurance coverage. Maintenance of
the value of each of WEC U.S. and WEC EMEA is dependent on the continued health,
operation, and cooperation of the other.
7
The WEC U.S. Non-Filers currently remain non-debtors as they are counterparties to valuable governmental
contracts. The Debtors reserve all rights to file voluntary chapter 11 petitions for one or both of the WEC U.S. NonFilers.
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Business Lines
16.
Westinghouse global operations are divided into five major business
linesâthe Nuclear Fuel & Component Manufacturing business (âNFCMâ or the âNuclear Fuel
and
Component
Manufacturing
Businessâ);
the
Operating
Plant
Business;
the
Decontamination, Decommissioning, Remediation & Waste Management business (âDDRâ or
the âDecommissioning Businessâ); the combined WECTEC Services business (the âServices
Businessâ); and New Plants & Major Projects business (the âConstruction Businessâ, and
collectively with the Services Business, the âNew Projects Businessâ or âNPBâ).8 The health
and success of the business lines vary significantly, and it is these variations that support the
Debtorsâ underlying strategy of separating the profitable portion of their businesses from the
unprofitable portion of their businesses through this chapter 11 process. As described above, a
primary goal of these chapter 11 cases is to separate the profitable Nuclear Fuel and Component
Manufacturing Business, Operating Plant Business, Decommissioning Business, and certain
portions of the New Projects Business (the âCore Businessesâ), from the unprofitable portions
of the New Projects Business (the âNon-Core Businessesâ).
(i)
Nuclear Fuel and Component Manufacturing Business
17.
The Westinghouse Nuclear Fuel and Component Manufacturing
Business is a leading global supplier of nuclear fuel products, components, and services for
nuclear fuels of all types. The NFCM division has a significant presence in the U.S. and Europe,
where it provides the majority of fuel products to all PWR reactors. It has a fast-growing
presence in Asia through strategic joint ventures, and as well as strategic licensing agreements in
Brazil, Spain, and Korea. The NFCM division generated revenues of approximately $1.48
8
On March 15, 2017, the Services Business and the Construction Business were combined for organizational
purposes only into the New Projects Business line.
8
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billion and EBITDA of approximately $165 million in FY 2015.9 This business line has been a
stable source of profits for years.
18.
Westinghouse manufactures more fuel types than any other supplier in
the world. The product line enjoys a strong reputation for delivering high performance fuel for
PWRs, boiling water reactors (âBWRsâ), Vodo-Vodyanoi Energetichesky reactors (âVVERsâ),
and advanced gas-cooled reactors (âAGRsâ). The annual global demand for fuel fabrication
services for PWR, BWR, and VVER (collectively known as âLight Water Reactorsâ) is about
7,000 tons of enriched uranium to be made into fuel assemblies, a number that is expected to
increase 35% by 2020.10 Westinghouse is the worldâs largest supplier of fuel for Light Water
Reactors, supporting 145 nuclear plants worldwide through a robust supply chain and multiple
manufacturing sites. Westinghouse services 84% of the currently-installed PWR plants in the
Americas. In addition, the Company delivers fuel to 22% of the active nuclear power plants in
Europe, the Middle East, and Africa, and 14% of the nuclear power plants in Asia.
19.
The NFCM business depends heavily on the operational integration of
WEC U.S. and WEC EMEA. For example, the NFCM business in the United States supplies the
WEC EMEA entities with necessary components, but WEC EMEA entity Uranium Asset
Management Ltd. (residing in the U.K.) manages uranium working stock for both WEC U.S. and
WEC EMEA.
(ii)
Operating Plant Business
20.
The Operating Plant Business division is one of the largest providers
of critical nuclear services to nuclear power plant operators globally, providing some degree of
9
Westinghouseâs fiscal year ends annually on March 31.
10
World Nuclear AssociationâNuclear Fuel Fabrication, http://www.world-nuclear.org/informationlibrary/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/fuel-fabrication.aspx (Feb. 14, 2017).
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services to over 80% of the operating nuclear power plants in the world. The division has a
significant presence in the United States and Western Europe, and emerging, high-growth
businesses in Asia, Central and Eastern Europe, and other parts of the world.
21.
OPB delivers automation and engineering products and services to the
global operating nuclear power fleet, including field services, testing, instrumentation and
control, welding and machining, and installation-related functions that help keep nuclear power
plants operating safely and competitively. Like the Nuclear Fuels Business, the Operating Plant
Business is a very profitable global business, generating worldwide revenues of approximately
$1.65 billion and EBITDA of approximately $238 million in FY2015.
22.
The Operating Plant Business line focuses on utilitiesâ needs for
external services for their plantsâ nuclear steam supply systems, providing a broad range of
engineering, field management and maintenance, and repair and replacement services.
Specifically, this segment offers products and services that keep nuclear power plants operating
in a safe, efficient, and competitive manner worldwide.
It provides outage, management,
maintenance and inspection services, repair and refurbishment parts and services, and design
engineering services to customers worldwide.
23.
Additionally, during regularly scheduled refueling outages (generally
every 18-24 months), the Operating Plant Business provides maintenance and safety inspections.
Scheduled outage services involve the complete shutdown of a plant for a specified period of
time to allow for refueling, maintenance, and testing services that help to ensure the continued
efficient and safe operations of the plant. The Operating Plant Business division also provides
similar services to operating plants on an ad hoc basis as needed between scheduled outages.
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The OPB division also offers automated control and protection
products used to operate nuclear power plants.
Products include new and replacement
instrumentation and process automation systems for operating plants, and integrated new
instrumentation and control systems for new plants. The OPB division is one of the largest
providers of nuclear automation products and services globally, providing products and services
to most major commercial plants, irrespective of OEM. The product line has a significant
presence in the U.S. and Europe, with a rapidly developing presence in Asia. The nuclear
automation product line is strongly focused on continuing growth through a combination of
superior platform technology and applications solutions.
(iii)
Decommissioning Business
25.
The Decommissioning Business deploys global technologies and
forms local partnerships to carry out long-term projects related to decontaminating,
decommissioning, and remediating nuclear power facilities. These services, provided to nuclear
power producers worldwide, include spent fuel management and plant decommissioning. The
DDR business line is the smallest business line operated by the Company, but it is expected to
experience growth as reactors worldwide reach the end of their useful lives. Revenues in
FY2015 were $45.0 million.
26.
The decommissioning of a nuclear power plant is a large, complex,
and expensive project that involves multiple companies working closely with regulators to meet
the regulatory standards of that particular jurisdiction.
As part of DDRâs decontamination
services, the division removes nuclear material from plant machinery and equipment to lower
personnel exposure and reduces handling costs and decommissioning time. DDRâs services also
reduce waste classification levels, allow for less-expensive disposal of used nuclear materials,
lower airborne risks, reduce spread of contamination and clean-up, and increase options for
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cutting plant materials. DDR also dismantles nuclear power plants to the point that they no
longer require measures for radiation protection.
(iv)
Services Business
27.
The Services Business
is run
by Debtor WECTEC,
LLC
(âWECTECâ) and its subsidiaries, and consists of two segments: (1) construction services for
the Advance Passive 1000 (âAP1000â) projectsâa new generation nuclear power plant design
that radically departs from existing nuclear plantsâin the U.S.; and (2) global project services,
staffing services, and government services to advance the use of nuclear energy worldwide as
well as non-nuclear engineering and construction services. WECTECâs AP1000-related business
segment is co-engaged with the Companyâs Construction Business in building the U.S. AP1000
Projects. The non-AP1000 business segment provides assistance to customers to enhance the
availability and reliability of their operating plants while sustaining regulatory compliance,
extending plant life, and reducing operation and maintenance costs.
28.
The Services Business also helps customers enhance the availability
and reliability of their operating plants while sustaining regulatory compliance, extending plant
life, and reducing operation and maintenance costs. Critical plant investigations are offered
using state-of-the-art codes and analytical methods for the design of systems and components,
structural and thermo-hydraulic calculations, probabilistic risk analysis, fire protection, radiation
protection, and environmental risk review. The Services Business offers numerous programs
related to margin management, up-rating, plant simplification, plant equipment upgrades, trip
reduction, technical specification optimization, regulatory compliance management, and
replacement of steam generators.
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Construction Business
29.
The Construction Business division delivers both new-plant projects
and major projects for new and already operating nuclear power plants globally. It consists of
two business segments: (1) engineering, procurement, and construction (âEPCâ) services for
customers around the globe, primarily offering the AP1000 technology; and (2) engineering and
procurement (âE&Pâ) services, such as design, equipment, and site installation and startup
support, to both AP1000 and non-AP1000 projects. While some portions of the Construction
Business are profitable, the main portion of the EPC business, which constructs the Vogtle and
VC Summer projects, has damaged the profitability of the entire Construction Business. As a
result, the Construction Business generated EBITDA from FY2013 to FY2015 of negative $343
million. 11 As described in detail below, these losses have accelerated in the past 15 months
following the Companyâs purchase of CB&I Stone & Webster, Inc. (âS&Wâ).
C.
Employees
30.
Westinghouse currently employs approximately 11,500 individuals in
19 countries, with approximately 9,200 of these employees working in the United States.
Approximately 2,000 employees work primarily on the Nuclear Fuel and Component
Manufacturing Business, approximately 1,850 employees work primarily on the Operating Plant
Business, approximately 400 employees work primarily on the Services Business, and
approximately 2,300 employees work primarily on the Construction Business. In addition,
approximately 1,200 employees provide central corporate services to all of the Debtorsâ business
lines and approximately 1,500 employees work primarily in the Companyâs engineering center
of excellence.
11
The Construction Business EBITDA excludes a goodwill impairment of $394.5 million taken in FY2013.
13
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The Debtorsâ employees perform a variety of critical functions for the
Debtors, including tasks pertaining to engineering, construction, product manufacturing, facility
and machine maintenance, testing, decommissioning and decontaminating, quality assurance,
management, purchasing and sales administration, finance and accounting, human resources,
customer service, safety, security, and other areas crucial to the Debtorsâ businesses. The skill
and expertise of the employees are fundamental to the success of the Debtorsâ businesses and
operations and, as a result, critical to these chapter 11 cases.
D.
L/C Facility
32.
Pursuant to that certain Second Amended and Restated Credit
Agreement, dated as of October 7, 2009, as amended and restated as of November 10, 2011, and
as further amended and restated as of December 15, 2015 (as amended, the âL/C Facilityâ), with
BNP Paribas as administrative agent (the âAdministrative Agentâ) for the banks and other
financial institutions (the âBanksâ), WEC and Non-Debtor Affiliate Westinghouse Electric UK
Holdings Limited (âWEC UKâ), a company registered in England and Wales, could borrow up
to $800 million to post letters of credit related to their various projects throughout the world. As
of the Petition Date, the L/C Facility is cash collateralized in an amount equal to 105% of the
face value of the outstanding letters of credit. Further, the L/C Facility is guaranteed by Toshiba
pursuant to a separate Second Amended and Restated Parent Guarantee, also dated as of October
7, 2009, as amended and restated as of November 10, 2011, and as further amended and restated
as of December 15, 2015 (as amended, the âParent L/C Guarantyâ). As of March 22, 2017,
WEC and WEC UK jointly and severally owed approximately $493.7 million under the L/C
Facility.
33.
On February 13, 2017, at the request of WEC, WEC UK, and Toshiba
(the âL/C Credit Partiesâ), the Banks and Administrative Agent waived certain specified
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defaults and made certain amendments to the L/C Facility, which were documented pursuant to
the Waiver and Amendment No. 1 to the L/C Facility (the âFirst L/C Facility Waiver and
Amendmentâ). However, after Toshiba failed to provide its financial statements to the Banks as
required on February 14, 2017, the First L/C Facility Waiver and Amendment terminated,
causing the L/C Credit Parties to once again be in default under the L/C Facility.
34.
Pursuant to that certain Waiver and Amendment No. 2 to the Second
Amended and Restated Credit Agreement and Amendment No. 1 to the Second Amended and
Restated Parent Guarantee (the âSecond L/C Facility Waiverâ), the L/C Facility was 105%
cash collateralized on March 28, 2017 with funds provided by Toshiba. The cash collateral is
being held in an account at the New York branch of the Administrative Agent in the name of LC
Collateral SPV LLC, an affiliate of Toshiba.
In exchange for the cash collateral, the
Administrative Agent and Banks agreed, among other things, to waive their right to call an event
of default against WEC UK upon the commencement of these chapter 11 cases.
E.
Additional Funding from Toshiba
35.
In addition to funding the cash collateral provided by Toshiba for the
L/C Facility just prior to the Petition Date, Toshiba provided emergency funding to WEC of
approximately $250.0 million under certain unsecured Promissory Notes dated February 6, 2017
and February 13, 2017 (collectively, the âWEC U.S. Notesâ). This emergency funding is
described in more detail below.
36.
As of the Petition Date, the Debtors do not have any other secured or
unsecured funded debt.
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III.
Events Leading to Chapter 11
A.
AP1000 Nuclear Power Plant
37.
In the early 2000s, building on earlier designs, engineers at
Westinghouse conceptualized the initial design for a new type of nuclear power plant called the
AP1000. The AP1000 plant is a Generation III+, two-loop PWR with a gross power rating of
3,415 megawatt thermal (MWt) and a nominal electrical output of 1,110 megawatt electric
(MWe). The U.S. Nuclear Regulatory Commission (the âNRCâ) initiated its formal review of
the AP1000 design on March 28, 2002, approving the original design certification on December
30, 2005. A series of additional revisions to the design were made over the next several years,
with the NRC certifying an amended standard plant design and publishing a final rule in
December 2011.
38.
The AP1000 design is a radical departure from existing nuclear power
plants. The primary advantage of the AP1000 is its simplified design and passive safety features.
Westinghouse believed the simplified design would make the AP1000 easier and less expensive
to build, operate, and maintain, while requiring fewer materials and a smaller footprint to
construct. The passive safety featuresâusing natural forces like gravity and convective cooling
rather than pumps and valvesâmean no operator action is required to assure safety, limiting the
risk of severe accidents.
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Figure 1 -- Illustration of the AP1000 reactor.
39.
Four of Westinghouseâs new-generation AP1000 reactors are being
built at the only two new nuclear construction sites currently in the United Statesâthe Allen W.
Vogtle Electric Generating Plant near Augusta, Georgia (the âVogtle Reactorsâ) and the Virgil
C. Summer Nuclear Station near Columbia, South Carolina (the âVC Summer Reactorsâ and
together with the Vogtle Reactors, the âU.S. AP1000 Projectsâ). Ground was broken for both
sites in 2011, with the expectation that the first reactors were expected to come online in
mid-2016.
40.
In addition to the U.S. AP1000 Projects, four AP1000 reactors are
currently being constructed in Sanmen and Haiyang, China based on 2007 agreements between
Westinghouse and Chinaâs State Nuclear Power Technology Corp. The two AP1000 reactors at
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Sanmen (south of Shanghai, China), as well as the two AP1000 reactors at Haiyang, were
expected to go online in 2013 and 2014. As of the Petition Date, construction at the Sanmen
nuclear power plant continues, and the Company expects the first AP1000 unit to come online in
late 2017 or early 2018. Similarly, the construction of the AP1000 reactors at the Haiyang power
plant are ongoing, and Westinghouse expects the first unit at that location to come online in late
2017 or early 2018.
B.
EPC Agreements
41.
Pursuant to that certain Engineering, Procurement, and Construction
Agreement dated April 8, 2008 (the âVogtle EPC Agreementâ) between Georgia Power
Company, a subsidiary of Southern Company (âSouthernâ), for itself and as agent for
Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and The City of Dalton,
Georgia, acting by and through its Board of Water, Light and Sinking Fund Commissioners
(collectively, the âVogtle Ownersâ) and a consortium of S&W, the nuclear engineering
company that was responsible for the physical construction of the plant, and WEC (the
âConsortiumâ), the Consortium agreed to construct the Vogtle Reactors. The Vogtle EPC
Agreement had a âGuaranteed Substantial Completion Dateâ (as defined therein) whereby the
Consortium had to substantially complete the first Vogtle Reactor by April 1, 2016, and the
second Vogtle Reactor by April 1, 2017. Failure to meet the Guaranteed Substantial Completion
Dates subjected the Consortium to a number of liquidated damages provisions.
42.
Similarly,
pursuant
to
that
Engineering,
Procurement,
and
Construction Agreement dated May 23, 2008 (the âVC Summer EPC Agreementâ and together
with the Vogtle EPC Agreement, the âEPC Agreementsâ) between South Carolina Electric &
Gas Company, a subsidiary of SCANA Corporation (âSCANAâ), for itself and as agent for the
South Carolina Public Service Authority (collectively, the âVC Summer Ownersâ and together
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with the Vogtle Owners, the âOwnersâ) and the Consortium, the Consortium agreed to construct
the VC Summer Reactors. The VC Summer EPC Agreement had a âGuaranteed Substantial
Completion Dateâ (as defined therein) whereby the Consortium had to substantially complete the
first VC Summer Reactor by April 1, 2016 and the second VC Summer Reactor by January 1,
2019. Failure to meet the Guaranteed Substantial Completion Dates subjected the Consortium to
a number of liquidated damages provisions.
43.
In both cases, Westinghouse generally was responsible for the design,
manufacture, and procurement of the nuclear reactor, steam turbines, and generators; while S&W
was responsible for on-site construction and procurement of auxiliary equipment. When signed
in April and May of 2008, the EPC Agreements were in effect the first contracts for new nuclear
power plant construction in the U.S. in 30 years.
44.
Each EPC Agreement includes a payment guarantee from Toshiba (the
âEPC Parent Guaranteesâ) in connection with any and all obligations of WEC U.S. to the
respective Owner under the applicable EPC Agreement when due.
C.
Delays at the U.S. AP1000 Projects
45.
In 2008, Westinghouse began work on the U.S. AP1000 Projects in
collaboration with the Owners, S&W, and the NRC. However, regulatory changes, including
ones stemming from the September 11, 2001 terrorist attacks in the United States, led to
additional NRC requirements for reactor design and licensing. Between 2009 and 2011, after the
EPC Agreements had already been executed, the NRC requested additional design changes to the
AP1000.
These new requirements and safety measures created additional, unanticipated
engineering challenges that resulted in increased costs and delays on the U.S. AP1000 Projects
and other AP1000 projects worldwide. These design changes delayed issuance of a combined
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license to start the U.S. AP1000 Projects until early 2012. As a result, the Consortium could not
pour the first concrete at the Vogtle and VC Summer construction sites until 2013.
46.
As
construction
progressed,
additional
unforeseen
challenges
regarding the projects emerged. As time passed and delays compounded, disputes arose between
the Owners and the Consortium regarding the pace of the projects and which parties bore the
ultimate responsibility for cost increases.
The Owners and the Consortium alleged claims
against each other, and the Vogtle Owners commenced litigation against Westinghouse, S&W,
and Chicago Bridge & Iron Company (âCB&Iâ)âthe owner of S&W. Southern, on behalf of
the Vogtle Owners, commenced a declaratory judgment suit regarding additional costs deriving
from regulatory change, and the Company believed there was a risk that litigation could
commence with SCANA as well. The deteriorating situation also created risk of claims between
Westinghouse and S&W regarding the allocation of increased costs.
47.
Under these circumstances, Toshiba, WEC, CB&I, and the Owners
entered into discussions to resolve the disputes. To resolve existing and potential litigation,
WEC considered the feasibility of acquiring S&W. WEC believed such an acquisition would
allow the parties to re-baseline the projects and increase the likelihood of their success. Upon
completing the acquisition, WEC planned to focus on project management with a newlyappointed subcontractor, Fluor Corporation (âFluorâ)âa U.S.-based global engineering and
construction company with knowledge and experience in nuclear plant constructionâtaking on
primary responsibility for construction.
D.
Acquisition of S&W
(i)
Westinghouse and CB&I Enter Into the S&W Purchase Agreement
48.
On October 27, 2015, a wholly-owned WEC subsidiary created to
acquire S&W, WSW Acquisition Co., LLC (âWSW Acquisitionâ), entered into a purchase
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agreement (the âS&W Purchase Agreementâ) to acquire S&W from CB&I.
The S&W
Purchase Agreement provided for a purchase price at closing of $0, subject to a Purchase Price
determination process specified in the Purchase Agreement (the âClosing Date Adjustmentâ),
and with the prospect of deferred payments in the future. The Deferred Purchase Price, the Net
Proceeds Earnout Amounts, and the Milestone Payments (all as defined in the S&W Purchase
Agreement) constituted deferred consideration that might be received over timeâresulting in a
headline price of $229 million for the acquisition.
49.
As part of the consideration for acquiring S&W, Westinghouse
generally agreed to assume S&Wâs current and future liabilities relating to the U.S. AP1000
Projects, including any liabilities that might arise from the cost overruns on the U.S. AP1000
Projects. The transaction closed on December 31, 2015.
50.
Westinghouse entered into settlement agreements with the Owners of
both U.S. AP1000 Projects, resulting in increases to the EPC Agreement prices and significant
schedule relief. Following Westinghouseâs acquisition of S&W, construction workers employed
by S&W were transferred to Fluor, which was directly responsible for construction work and site
management at the project sites. With Fluor on board, WEC believed the construction of the
U.S. AP1000 Projects would improve.
(ii)
Purchase Price Determination Process
51.
The Purchase Price determination process under the S&W Purchase
Agreement could result in either Westinghouse or CB&I being responsible for a post-closing
amount to the other, depending upon, inter alia, whether CB&I delivered S&W to Westinghouse
with net working capital greater or less than the Target Net Working Capital Amount of $1.174
billion.
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As the December 31, 2015 closing approached, CB&I prepared the
Closing Payment Statement, which included a âgood faith estimateâ of an âEstimated Closing
Date Purchase Price.â On December 28, 2015, CB&I provided Westinghouse with the Closing
Payment Statement that included an Estimated Net Working Capital Amount of $1,601,805,000.
CB&Iâs estimate exceeded the Target Net Working Capital Amount by approximately $428
million. The delivery of the Closing Payment Statement obligated Westinghouse to provide
CB&I with the Closing Statement setting forth Westinghouseâs good faith calculations resulting
in the Closing Date Purchase Price.
53.
On April 28, 2016, Westinghouse presented CB&I with the Closing
Statement, wherein Westinghouse calculated the Net Working Capital Amount at closing as
negative $976,500,000. This figure was dramatically less than the Target Net Working Capital
Amount and would require a payment from CB&I to Westinghouse of approximately $2.15
billion.
(iii)
Litigation over the Closing Date Adjustment
54.
Pursuant to the S&W Purchase Agreement, CB&I had 60 days after
Westinghouseâs delivery of its closing payment statement to object to Westinghouseâs
calculations. A timely objection would trigger a dispute resolution mechanism under the S&W
Purchase Agreement.
55.
On July 21, 2016, shortly before the expiration of the objection period,
CB&I ignored the dispute resolution mechanism and filed an action in the Court of Chancery in
the State of Delaware against WEC and WSW Acquisition (case no. 12585-VCL). CB&Iâs
complaint asserted two counts for declaratory relief. Count I contended that Westinghouseâs
calculation of the Closing Date Adjustment breached the express terms of the S&W Purchase
Agreement. Count II contended that Westinghouseâs calculation of the Closing Date Adjustment
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breached the implied covenant of good faith and fair dealing inherent in the S&W Purchase
Agreement. Westinghouse asserted that the dispute should be heard by the independent auditor
pursuant to the terms of the S&W Purchase Agreement and that it had not violated any
provisions of the S&W Purchase Agreement as a matter of law.
56.
Ultimately, on December 2, 2016, the Delaware Chancery Court ruled
in favor of Westinghouse, holding that the plain language of the S&W Purchase Agreement
established that the disputes at issue were to be resolved by the independent auditor, and that
Westinghouse had not breached any express provisions on the S&W Purchase Agreement. On
January 5, 2017, the parties retained the independent auditor to hear the dispute. As of the
Petition Date, this dispute remains unresolved.
(iv)
Cost to Complete Estimates
57.
After the S&W acquisition, assessment of the status of the projects led
Westinghouse and Fluor to conclude that the number of hours required to complete the projects,
labor costs, project management, and procurement costs were significantly higher than
anticipated. As the Companyâincluding its newly-purchased subsidiaryâcontinued to work, it
became increasingly clear to the Company that the estimated cost of S&Wâs scope of work on
the U.S. AP1000 Projects needed to be increased significantly.
58.
By late Fall 2016, Westinghouse began working around-the-clock with
Fluor and others to try to quantify the increased U.S. AP1000 Project construction costs and
simultaneously find ways to limit the increases. Over the course of the next several weeks, the
two companies preliminarily identified three areas driving costs. First, Westinghouse and Fluor
estimated that completion of the U.S. AP1000 Projects on schedule could require $3.7 billion in
additional labor costs. Second, equipment prices and vendor costs associated with the building
of specific components could drive up costs by an additional $1.8 billion. Finally, additional risk
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and contingency planningâincluding warranty and fee claimsâcould increase costs by
approximately $600 million. These preliminary estimates of approximately $6.1 billion could
not be sustained by Westinghouse.
59.
In early December 2016, Westinghouse reported to Toshiba about the
possibility of U.S. AP1000 Project losses and the resulting goodwill impairment that might be
recognized on Toshibaâs fiscal reports. Westinghouse also reported that it was working to
quantify the total amount of the estimate cost increases with additional specificity, but that it
believed the costs totaled in the billions of dollars. Subsequently, Toshiba and Westinghouse
began working together to obtain an accurate understanding of the situation and discuss
appropriate countermeasures.
60.
On December 27, 2016, while Westinghouse continued its review of
the purchase price accounting process and its determination of the estimated cost increases,
Toshiba made an announcement, âPossibility of Recognition of Goodwill and Loss Related to
Westinghouseâs Acquisition of CB&I Stone & Webster,â that considered the possible impact on
Toshibaâs financial status. Toshiba continued the analysis with Westinghouse and submitted the
results to Toshibaâs financial auditor in mid-January 2017. Faced with potentially massive
liabilities under the EPC Agreements and mounting day-to-day costs at the project sites, Toshiba
and Westinghouse each explored their limited options.
61.
Under the EPC Agreements, cessation of work by WEC on the U.S.
AP1000 Projects could lead to significant damage claims. The VC Summer EPC Agreement
caps liability at 25% of payments made to the Consortium as of the date of the event giving rise
to the claim. The maximum total liability under the Vogtle EPC Agreement is capped at 20% of
the Contract Price (as defined therein) of the Vogtle Reactors and 40% of the Contract Price for
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abandonment of the work. Accordingly, Westinghouse would likely face claims by the Owners
of billions of dollars predicated upon material breach of the EPC Agreements.
E.
Westinghouse Liquidity Crisis
62.
As Westinghouse continued to quantify the ultimate estimated cost
increases in late 2016 and early 2017, Westinghouse and Toshiba each began to consider various
strategic options.
63.
While Westinghouse, Toshiba, and their advisors considered solutions
to the increasingly complex problems, Westinghouse requested that Toshiba provide it with an
emergency liquidity infusion to buy the parties additional time to explore options. Toshiba
responded by providing emergency funding to Non-Debtor Affiliate WEC UK on January 17,
2017, in the amount of $650 million, and then providing funding to WEC of approximately
$250.0 million in early Februaryâ$100.0 million of funding on February 6, 2017 and a further
$150.0 million of funding on February 13, 2017âpursuant to the WEC U.S. Notes.
This
additional liquidity allowed the Debtors to continue to consider options as well as begin
contingency planning for a potential chapter 11 filing.
64.
In the coming weeks, as cash shortfalls related to the U.S. AP1000
Projects escalated, Westinghouseâs overall liquidity crisis was deepening, and began to spill over
from WEC U.S. to WEC EMEA. In an effort to alleviate some of the pressures that
Westinghouse faced in the U.S. and abroad, the Company and Toshiba discussed the possibility
of additional emergency funding from Toshiba. As talks progressed into March 2017, however,
Toshiba stated it could not provide additional funding without collateral, including potentially
through debtor-in-possession funding to WEC U.S. in chapter 11. Westinghouse adopted various
liquidity-saving measures while it considered next steps.
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Ultimately, the Debtorsâ dwindling liquidity forced them to focus
their efforts on a reorganization in chapter 11 in order to obtain necessary financing, resolve their
issues with the U.S. AP1000 Projects, and preserve the value of the Core Businesses.
IV.
Preparation for Chapter 11
A.
DIP Financing
(i)
WEC Sources DIP Financing
66.
On March 9, 2017, the WEC board of directors authorized PJT to
begin the process of sourcing potential debtor-in-possession financing from third parties. The
Debtorsâ primary strategic considerations when marketing the financing opportunity were the
identification of an economical and reliable source of financing that could (i) support the
Debtorsâ need for a large DIP loan on the best economic terms that would provide for a letter of
credit facility and on-lending to WEC EMEA and (ii) partner with the Debtors for the length of
their chapter 11 cases and afford them the time, flexibility, and breathing space to pursue a
restructuring strategy that is in the best interests of their estates.
67.
Over the next few weeks, PJT and the Debtorsâ other advisors began
communicating with numerous potential financing sources to ascertain their interest in providing
DIP financing to Westinghouse. The interest received from the capital markets in financing the
Debtorsâ chapter 11 cases was tremendous, as the Debtors were soon inundated with proposals
from a number of prominent banks, private equity firms, and hedge funds in a highly competitive
process.
68.
Ultimately, the Debtors determined that the $800 million commitment
submitted by Apollo Investment Corporation, AP WEC Debt Holdings LLC, and Midcap
Financial Trust (collectively, âApolloâ or the âInitial Lenderâ), including a $225 million letter
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of credit facility with Citigroup Global Markets Inc., as issuing bank (in such capacity, the âL/C
Issuerâ and with Apollo, the âLendersâ), was the best financing proposal available to the
Debtors, the Debtors then began to negotiate the terms and conditions of the DIP Credit
Agreement. The terms and conditions of the DIP Credit Agreement were negotiated extensively
and at armsâ-length by well-represented, independent parties in good faith, and are consistent
with, if not better than, the terms generally provided to Debtors in other similar chapter 11 cases.
69.
Through the highly competitive process, the Debtors were able to
obtain the necessary financing on the best terms available in the market. The DIP Facility
provides a vehicle for the Debtors and Apollo, a preeminent global financial institution, to
partner together to achieve a successful reorganization of the Debtorsâ businesses. The terms of
the DIP Facility demonstrate the success of the marketing and negotiation process, and are a
testament to the confidence that the capital markets have in the Debtorsâ Core Businesses. The
DIP Facility gives the Debtors the funding and flexibility needed to reorganize around their Core
Businesses and successfully emerge from these chapter 11 cases.12
(ii)
Westinghouse Has Immediate Need for DIP Financing
70.
The Debtors require the financing available under the DIP Facility to
have sufficient liquidity to operate their business and administer their estates during these
chapter 11 cases.
As a result of the dramatic liquidity drain caused by Westinghouseâs
obligations related to the U.S. AP1000 Projects, as of the Petition Date, the Debtors do not have
sufficient liquidity to support their ongoing operations.
In addition to funding their own
operations, the Debtors need to access the DIP Facility to on-lend funds to WEC EMEA to
12
More detail regarding the DIP Facility and the Debtorsâ process to obtain the best possible facility are in the
Declaration of Mark Buschmann in Support of Motion of Debtors for Interim and Final Orders (I) Authorizing
Debtors to Obtain Senior Secured, Superpriority, Postpetition Financing, (II) Granting Liens and Superpriority
Claims, and (III) Scheduling a Final Hearing (the âBuschmann Declarationâ), filed contemporaneously herewith.
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maintain the solvency and operations of such entities to avoid value destructive actions taken by
such entitiesâ stakeholders. Absent authority to access DIP Financing, even for a limited period
of time, Westinghouse (including WEC EMEA) would not be able to operate its businesses,
which would destroy value and cause immediate and irreparable harm to the Debtorsâ estates and
creditors.
71.
The Debtors are currently unable to pay their debts as they become
due. Accordingly, the orderly continuation of the Debtorsâ businesses is dependent on their
ability to access the DIP Facility. The DIP Facility will allow the Debtors to, among other
things, make payroll and satisfy other working capital and general corporate purposes of the
Debtors, including making essential payments to suppliers and regulatory agencies.
72.
In short, access to the DIP Facility is essential for the Debtors to assure
their employees, customers, and vendors, as well as the applicable regulatory and governmental
bodies, that the Debtors have sufficient capital to continue their operations in the ordinary course
of business during the pendency of these chapter 11 cases.
(iii)
Immediate Need to Preserve Value of WEC EMEA
73.
Equally crucial to the value of the Debtorsâ estates and their
reorganization efforts is preserving the value of WEC EMEA.
The Debtors and WEC EMEA
entities depend heavily on one another for business support relating to operations, intellectual
property, credit support and guarantees, and manage certain business lines on a consolidated
basis, and as such have significant synergies that in effect create a globally integrated and
interdependent nuclear power company. Certain business lines see the various Westinghouse
entities in the U.S. and globally share equipment and professionals, depending on the services
and licensing that are required. These entities also rely on one another to service each otherâs
customers.
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Furthermore, the Debtors have historically relied on WEC EMEA as
(i) a significant source of revenue through the intercompany purchase of goods and services
pursuant to a transfer pricing program and (ii) a cash-flow positive contributor of liquidity to
Westinghouse. As a result, the value of the Debtorsâ estates is dependent upon WEC EMEA
entities maintaining their operations and going concern value.
75.
Until recently, WEC U.S. and WEK UK and certain of its subsidiaries
were party to a cash pooling arrangement (the âGlobal Cash Poolâ) that allowed the parties to
efficiently transfer cash to where it was needed in the Westinghouse organization. Withdrawals
from the Global Cash Pool generated receivables to the Global Cash Pool owed by withdrawing
entities and deposits into the Global Cash Pool generated payables owed to the depositing
entities. Certain of the WEC EMEA entities were dependent on the Global Cash Pool as a
source of liquidity. In recent months, as a result of Westinghouseâs deteriorating liquidity, the
balance of the Global Cash Pool diminished, causing liquidity issues for a number of the WEC
EMEA participants, and raising concerns about their solvency going forward.
76.
The combination of dwindling liquidity in the Global Cash Pool and
the constraints on issuing LCs as a result of the defaults under the LC Agreement, caused certain
WEC EMEA entities to express significant concern regarding their ability to continue to operate
as a going concern and/or satisfy certain financial assurance requirements with respect to pension
obligations and maintaining nuclear regulatory licenses. In fact, certain WEC EMEA entities
have stated that they will need to commence local insolvency proceedings in the absence of
immediate capital and liquidity infusions. Although the Debtors have been working closely with
WEC EMEA to manage their liquidity concerns and provide assurance to the relevant regulatory
bodies, a financing solution is required.
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Given the Debtorsâ currently liquidity situation, access to the DIP
Facility to provide funds to on-lend to WEC EMEA entities is necessary to ensure the orderly
continuation of WEC EMEAâs operations and the preservation of WEC EMEAâs going concern
value. The DIP Facility will ensure the financial stability of WEC EMEA throughout the
Debtorsâ chapter 11 cases, and allow the Debtors to develop and implement a global
restructuring solution aimed at maximizing the value of the Westinghouse enterprise for the
benefit of the Debtorsâ estates.
B.
Negotiations with the U.S. AP1000 Project Owners
78.
As Westinghouse worked to buy itself time and stretch its limited
liquidity, it also negotiated with the Owners in an effort to achieve a limited breathing spell on
the projects. These negotiations resulted in the two short-term settlements reached with the VS
Summer Owners and the Vogtle Owners that are the subject of the Motion of the Debtors
Pursuant to 11 U.S.C. § 105(a) for Entry of an Order Approving the Interim Assessment
Agreements (the âInterim Assessment Agreement Approval Motionâ). These agreements
ultimately permit the Debtors and the Owners to continue negotiations for up to the first 30 days
of the chapter 11 cases in order to explore and assess scenarios for the potential resolution of the
U.S. AP1000 Projects.
(i)
VC Summer Construction Continuation Agreement
79.
After back-and-forth negotiations in the weeks before the Petition
Date, the Debtors were able to reach a settlement with the VC Summer Owners on the Summer
Reactors on March 28, 2017 pursuant to the Interim Assessment Agreement (the âVC Summer
Interim Assessment Agreementâ).
Concurrently, the Debtors negotiated with the Vogtle
Owners for a similar arrangement on the Vogtle Reactors, eventually executing the Interim
Assessment Agreement (the âVogtle Interim Assessment Agreementâ and with the VC Summer
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Interim Assessment Agreement, the âInterim Assessment Agreementsâ) on March 29, 2017.13
Both Interim Assessment Agreements are effective as of the commencement of these chapter 11
cases.
80.
The Interim Assessment Agreements give their respective Owners,
WEC, and WECTEC through the earlier of (a) April 28, 2017, or (b) termination of the other
Ownersâ Interim Assessment Agreement (such period, the âInterim Assessment Periodâ) to
work out a long-term solution to the issues related to the construction of the U.S. AP1000
Projects. Further, upon five (5) business daysâ notice, any of Owners has the right to elect to
terminate their respective Interim Assessment Agreement.
81.
Pursuant the Agreements, the Owners have agreed to the following
key terms during the Interim Assessment Periods:14
a. the Owners shall be obligated to pay all amounts incurred by the Debtors for work
performed by subcontractors and vendors on a go-forward basis in connection with
completion of the Ownersâ respective projects;
b. the Owners will each have the right, but not the obligation, to pay subcontractors and
vendors with prepetition amounts owed by the Debtors in respect of their projects; and
c. the Owners will pay the Debtors amounts calculated by the Debtors to cover their costs
for scope of services, including design engineering, field engineering, equipment and
commodities procurement, construction management, commissioning, project
management, project controls, project site services, licensing, quality assurance,
environment safety and health, information technology, and records management,
provided by the Debtors.
82.
In sum, during the Interim Assessment Periods, construction will
continue on the U.S. AP1000 Projects, but in a manner that is cash-neutral and cost-neutral to the
Debtors. Entry into these agreements was a vital piece of the Debtorsâ prepetition strategy and
13
The Vogtle Interim Assessment Agreement was executed in advance of the filing of the Debtorsâ chapter 11
petitions.
14
This summary is qualified in its entirety by the provisions of the Interim Assessment Agreements. In the event
that there is any inconsistency between the description provided in this Motion and the actual terms of the
Agreements, the Agreements shall control.
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provides the Debtors with additional time to determine how they can maximize the value of the
U.S. AP1000 Projects to the estates.
V.
Relief Sought in First Day Papers15
83.
Contemporaneously with the filing of their chapter 11 petitions, the
Debtors have filed several First Day Motions seeking relief that is necessary to enable the
Debtors to smoothly transition into these chapter 11 cases and minimize disruptions to their
business operations. I respectfully submit that the relief requested in each First Day Motion
should be granted, because such relief is a critical element in stabilizing and facilitating
Westinghouseâs operations during the pendency of these chapter 11 cases.
84.
A summary of the relief requested in each First Day Motion is set forth
below. I have reviewed each of the First Day Motions and confirm that all of the facts set forth
therein are true and correct to the best of my knowledge and belief, based upon my personal
knowledge of the Debtorsâ businesses, employees, operations, and finances; information learned
from my review of relevant documents; my discussions with members of the Debtorsâ senior
management and advisors; information provided to me by employees working under my
supervision; or my opinion based on experience, knowledge, and information concerning the
Debtorsâ businesses.
A.
Administrative Motions
(i)
Joint Administration Motion
85.
By this motion, the Motion of Debtors Pursuant to Fed. R. Bankr.
P. 1015(b) for Entry of Order Directing Joint Administration of Chapter 11 Cases (the âJoint
Administration Motionâ) the Debtors request entry of an order directing joint administration of
15
Terms used but not defined in this section shall have the meanings ascribed to them in the respective motion.
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their chapter 11 cases for procedural purposes only pursuant to Bankruptcy Rule 1015(b).
Specifically, the Debtors request that the Court maintain one file and one docket for all of the
chapter 11 cases under the lead case, Westinghouse Electric Company LLC.
Further, the
Debtors request that an entry be made on the docket of each of the chapter 11 cases of the
Debtors other than Westinghouse Electric Company LLC to indicate the joint administration of
the chapter 11 cases.
86.
Given the integrated nature of the Debtorsâ businesses, joint
administration of the chapter 11 cases will provide significant administrative convenience
without harming the substantive rights of any party in interest. There are 30 Debtors with
approximately 35,000 creditors on a consolidated basis. Many of the motions, hearings, and
orders that will be filed in the chapter 11 cases will almost certainly affect each of the Debtors. I
believe that an order directing joint administration of the chapter 11 cases will reduce fees and
costs by avoiding duplicative filings and objections and will allow the United States Trustee for
the Southern District of New York (the âU.S. Trusteeâ) and all parties in interest to monitor the
chapter 11 cases with greater ease and efficiency.
(ii)
Automatic Stay Motion
87.
Pursuant to the Motion of Debtors Pursuant to 11 U.S.C. § 105 for
Entry of an Order Enforcing the Protections of 11 U.S.C. §§ 362, 365, 525, and 541(c), (the
âAutomatic Stay Motionâ) the Debtors request entry of an order enforcing the protections of
sections 362, 365, 525, and 541(c) of the Bankruptcy Code to aid in the administration of these
chapter 11 cases and to help ensure that the Debtorsâ global business operations are not
disrupted.
88.
The relief requested is particularly appropriate because the Debtors,
through their various Debtor and Non-Debtor Affiliates and subsidiaries, operate in numerous
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countries with different legal systems, including Belgium, Brazil, China, the Czech Republic,
France, Germany, Italy, Japan, the Republic of Korea, South Africa, Spain, Sweden,
Switzerland, Ukraine, and the United Kingdom, among others.
The Debtors engage with
numerous foreign customers, suppliers, and other vendors, as well as foreign regulators and other
governmental units.
Certain of the Debtors are also incorporated under the laws of other
countries, including Belgium, Brazil, China, the Czech Republic, France, Germany, India, South
Africa, Sweden, the Republic of Korea, and the United Kingdom, among others.
Moreover,
many of the Debtorsâ key contracts are governed by the laws of still more foreign jurisdictions.
Absent an order from this Court, parties might attempt to take improper actions against the
Debtors and/or property of their estates.
(iii)
Schedules and Statements Extension Motion
89.
Pursuant to the Motion of Debtors Pursuant to 11 U.S.C. §§ 105(a)
and 521, Fed. R. Bankr. P. 1007(c) and 9006(b), and Local Rule 1007-1 for Entry of Order
Extending Time to File Schedules of Assets and Liabilities, Schedules of Executory Contracts
and Unexpired Leases, and Statements of Financial Affairs (the âSchedules and Statements
Extension Motionâ), the Debtors request entry of an order granting additional time to file their
schedules and statements of financial affairs (collectively, the âSchedules and Statementsâ) for
an additional 30 days. The Debtors estimate that they have approximately 35,000 creditors and
other parties in interest on a consolidated basis. The breadth of the Debtorsâ business operations
requires the Debtors to maintain voluminous books and records and complex accounting
systems. Given the size, complexity, and geographic diversity of their business operations, and
the number of creditors, I submit that the large amount of information that must be assembled to
prepare the Schedules and Statements and the hundreds of employee and advisor hours required
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to complete the Schedules and Statements would be unnecessarily burdensome to the Debtors
during the period of time following the Petition Date.
(iv)
Waiver of Creditor Matrix and Noticing Procedures Motion
90.
By this Motion of Debtors Pursuant to 11 U.S.C. §§ 105(a) and
342(a), and Fed. R. Bankr. P. 1007(a)(3) and 2002(a), (d), (f), and (l), for Entry of Order (I)
Waiving Requirement to File a List of Creditors and (II) Granting Debtors Authority to Establish
Procedures for Notifying Creditors of Commencement of Chapter 11 Cases (the âWaiver of
Creditor Matrix and Noticing Procedures Motionâ), the Debtors seek entry of an order
waiving the requirements to file a list of creditors on the Petition Date. In lieu of filing the list of
creditors, the Debtors propose to provide to their notice and claims agent a consolidated list of
creditors. The Debtors propose that the notice and claims agent undertake all mailings directed
by the Court or the U.S. Trustee, or as required by the Bankruptcy Code, including, without
limitation, the notice of commencement of these chapter 11 cases. In addition, the Debtors
propose to publish the notice of commencement in the national editions of each of the Wall
Street Journal and The New York Times, as well as in the Pittsburgh Post-Gazette and on the
website to be established by the Debtorsâ notice and claims agent. Given the large number of
creditors, I submit that the notice and claims agentâs assistance with mailing and preparation of
creditor lists and notices will ease administrative burdens that would otherwise fall upon the
Court and the U.S. Trustee, while at the same time ensuring that actual notice is provided to all
of the Debtorsâ creditors in an efficient and cost-effective manner.
B.
Operational Motions Requesting Immediate Relief
(i)
Cash Management Motion
91.
As set forth in the Debtorsâ Motion Pursuant to 11 U.S.C. §§ 105(a),
345(b), 363(b), 363(c), 364(a), 503(b)(1) and 507 and Fed. R. Bankr. P. 6003 and 6004 for (I)
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Interim and Final Authority to (A) Continue Existing Cash Management System, (B) Continue
Existing Intercompany Transactions, (C) Honor Certain Prepetition Obligations Related
Thereto, and (D) Maintain Business Forms and Existing Bank Accounts; (II) An Extension of
Time to Comply With, or Seek Waiver Of, 11 U.S.C. § 345(b); and (III) Related Relief (the âCash
Management Motionâ), prior to the commencement of these chapter 11 cases, the Debtors
maintained a complex cash management system to collect, concentrate, and disburse funds
generated by the Debtorsâ operating entities (the âLegacy Cash Management Systemâ). In
broad terms, the Legacy Cash Management System is similar to the cash management systems
used by other global corporate entities.
92.
Legacy Cash Management System.
Although the accounts and
processes connected to the Legacy Cash Management System remain functional, the Debtors
have substantially transitioned from use of the Legacy Cash Management System to the current
simpler, more efficient, and less costly Cash Management System (defined below). The Debtors
are working with their customers to ensure that payments are directed to the BMO Harris Bank
Account (defined below) under the Cash Management System and are steadily discontinuing use
of the Bank Accounts in the Legacy Cash Management System.
93.
The Legacy Cash Management System is comprised of approximately
16 Bank Accounts: seven maintained by JPMorgan Chase Bank (âJPMorganâ) and nine
maintained by PNC Bank (âPNCâ).
JPMorgan and PNC are designated as authorized
depositories by the Region 2 U.S. Trustee pursuant to the U.S. Trusteeâs Operating Guidelines
for Chapter 11 Cases (the âUST Guidelinesâ). All of these Bank Accounts are owned by the
Debtors with the exception of three Bank Accounts owned by non-Debtor affiliates: (i) the PNC
Bank Account ending in -5253 owned by Westinghouse Government Services LLC, (ii) the
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JPMorgan Bank Account ending in -0864 owned by Westinghouse Electric (Asia) SA, and (iii)
the PNC Bank Account ending in -6797 owned by NuCrane Manufacturing LLC.
94.
Central to the functioning of the Legacy Cash Management System
was a JPMorgan Bank Account ending in -3172 (the âConcentration Accountâ). At the end of
each day, funds from other JPMorgan Bank Accounts ending in -0211, -1890, and -4977 were
automatically swept into the Concentration Account and any funds in the other JP Morgan Bank
Accounts and PNC Bank Accounts were swept by wire transfer.
Under the Legacy Cash
Management System, substantially all disbursements were made out of PNC Bank Accounts
ending in -3056 and -3048 (the âDisbursement Accountsâ).
95.
In addition to cash receipts from operations, the Legacy Cash
Management System benefitted from a cash pool (the âGlobal Cash Poolâ) maintained with
Bank Mendes Gans (âBMG Bankâ). The Global Cash Pool aggregated balances in accounts at
BMG Bank held by WEC, WEC UK, and subsidiaries of WEC UK. The Global Cash Pool
allowed WEC U.S. and WEC EMEA entities efficiently to transfer cash to where it was most
needed. Withdrawals from the Global Cash Pool generated receivables to the Global Cash Pool
owed by withdrawing entities, and deposits into the Global Cash Pool generated payables owed
to the depositing entities. If the Debtors needed to access funds in the Global Cash Pool, WECâs
Treasury (âTreasuryâ) manually transferred funds into the Concentration Account from the
Global Cash Pool.
96.
Activity in the Legacy Cash Management System has steadily
declined. The Debtors no longer withdraw or deposit funds into the Global Cash Pool. On
February 16, 2017, BMG Bank sent a letter terminating the Cash Pool Agreement, dated June 17,
2010, among WEC, WEC UK, other WEC EMEA entities, and BMG, effective as of May 17,
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2017. On March 24, 2017, BMG Bank sent a notice of temporary suspension of the Global Cash
Pool to WEC and other participants. The Debtorsâ use of Bank Accounts within the Legacy
Cash Management System is substantially limited to customer receipts into the JPMorgan Bank
Account ending in 10211 and PNC Bank Account ending in 3013. The Disbursement Accounts
are substantially dormant. Funds deposited in Bank Accounts in the Legacy Cash Management
System continue to flow to the Concentration Account, but as part of its transition to the Cash
Management System, Treasury regularly transfers funds from the Concentration Account to the
BMO Harris Bank Account, from which it then makes disbursements.
97.
The Debtors are making every effort to ensure a smooth transitionâ
without any disruption to cash flowâto exclusive use of the BMO Harris Bank Account for
deposits and disbursements. Although there is still functionality and limited use of the Legacy
Cash Management system, the Debtors have made significant progress in transitioning to the
Cash Management System. Any disruption to this process would likely have a severe and
adverse impact on the day-to-day business operations of the Debtors.
98.
Cash Management System. As stated above, the Debtors recently
formalized a new centralized cash management process as a result of strategic planning and in
preparation for these chapter 11 cases. The Cash Management System is a centralized system,
designed to collect and transfer the funds generated by the Debtors and disburse those funds to
satisfy the obligations incurred in the course of operating the Debtorsâ businesses from a single
bank account. Until the transition from the Legacy Cash Management System is complete, the
Cash Management System utilizes the Legacy Cash Management System to the limited degree
described above.
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The Cash Management System allows the Debtors to efficiently
collect the cash generated by their business and pay their financial obligations. Specifically, it
facilitates four principal cash functions: (1) cash collection; (2) cash concentration; (3)
disbursements to fund the Debtorsâ operations; and (4) cash transfers among the Debtors and
certain Non-Debtor Affiliates. It also enables the Debtors to facilitate their cash forecasting and
reporting, monitor collection and disbursement of funds, and maintain control over the
administration of the Bank Accounts.
100.
The Cash Management System utilizes a central operating Bank
Account that is held and controlled by Westinghouse and is maintained by BMO Harris Bank
N.A. (âBMO Harrisâ and the âBMO Harris Bank Accountâ).
As discussed above, the
Debtors also use on a limited and diminishing basis several active Bank Accounts from the
Legacy Cash Management System. WEC also maintains certain miscellaneous accounts, set up
and utilized by the Debtorsâ Legacy Cash Management System and the Cash Management
System prior to the Petition Date.16 Because these accounts are substantially dormant, they are
not described for the purposes of this Motion.
101.
System.
WEC serves as the âcentral bankerâ entity in the Cash Management
All monies deposited in the Bank Accounts associated with the Legacy Cash
Management System are swept into the Concentration Account and then manually transferred to
the BMO Harris Bank Account. With limited exceptions, Debtors other than WEC do not have
16
These accounts include an account at Mizuho Bank, LTD (âMizuhoâ) ending in -5926 and an account at
Sumitomo Mitsui Banking Corp (âSMBCâ) ending in -3837. The Debtors use the accounts at Mizuho and SMBC
to receive cash from Toshiba. Deposits from Toshiba are to be swept into the BMO Harris Bank Account at the end
of each day that the funding is received, or as soon as practicable thereafter. WEC LLC also holds two accounts at
BMG Bank ending in -6483 and -4925 in connection to the Global Cash Pool, WEC no longer uses these accounts
because it does not deposit or withdraw funds from the Global Cash Pool, which is suspended. Debtor
Westinghouse Energy Systems LLC has three accounts at Citibank Europe Plc. These accounts support Debtor
Westinghouse Energy Systems LLCâs operations in Bulgeria. Cash in these accounts is not swept into BMO Harris
Bank Account or the Concentration Account.
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their own accounts. Rather, each Debtor relies on the Cash Management System in the course of
its day-to-day business operations. This system allows seamless accounting in a single location
across and among all Debtor entities, reducing banking expenses, permitting prompt and accurate
liquidity tracking, and allowing simple and accurate intercompany allocations and transfers. To
lessen the disruption caused by these chapter 11 cases, minimize expense, and maximize the
value of their estates, it is vital that the Debtors continue their transition to and use of the Cash
Management System.
102.
Cash Collection. Revenue is generated by WEC U.S., which collects
revenue primarily from (i) service agreements; (ii) sales of nuclear fuel products and related
servicing agreements; and (iii) funds generated from construction projects. The Debtors also
receive cash payments from counterparties to the Debtorsâ derivatives contracts.
103.
Concentration. With the exception of the above-mentioned customer
payments made to Bank Accounts connected to the Legacy Cash Management System,
substantially all payments made to WEC U.S. are deposited or directed into the BMO Harris
Bank Account.
Any payment made to a Bank Account connected to the Legacy Cash
Management System is swept into the Concentration Account and then periodically transferred
to the BMO Harris Bank Account.
Nearly all cash received by the Debtors is ultimately
collected and held at BMO Harris. When a deposit is made to the BMO Harris Bank Account,
WEC books a journal entry for the applicable Debtor or non-Debtor affiliate on account of that
transaction.
104.
Disbursements.
WEC U.S. makes substantially all of their
disbursements out of the BMO Harris Bank Account. The disbursements relate primarily to
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(i) operating expenses, including payroll and other employee expenses;17 (ii) research and
development costs; (iii) corporate overhead expenses; (iv) trade payables to vendors; and
(v) taxes.
Disbursements, including wires, certain automated clearing house (âACHâ) and
electronic funds transfer (âEFTâ) payments, certain accounts payable checks, and certain checks
to governmental entities are issued by WEC.
WEC books journal entries to allocate the
disbursements to the applicable Debtor and non-Debtor affiliates.
105.
Intercompany Transactions and Claims Among WEC U.S. Entities.18
As described in the Donahue Declaration, the business and financial affairs of the Debtors and
non-Debtor affiliates are complex. Because not all U.S. entities generate revenue, the Debtors
collect and move funds through numerous bank accounts to ensure the continued operation of
each entity. In order to manage the movement of funds, in the ordinary course of business, the
WEC U.S. entities engage in a variety of intercompany transactions (the âIntercompany
Transactionsâ), including those described above with respect to cash concentration and
disbursements, that give rise to intercompany receivables and payables (collectively, the
âIntercompany Claimsâ). The Debtors track all Intercompany Transactions processed through
the Cash Management System by use of their enterprise resource planning software system (the
âERP Systemâ) and are able to ascertain, trace, and account for all Intercompany Transactions
and Intercompany Claims.
106.
The main Intercompany Transactions giving rise to Intercompany
Claims are:
a.
17
Cash Receipts Activities. As described above, using the Cash
Management System, WEC U.S. entities concentrate their receipts into the
Such expenditures are described in more detail in the section regarding the Employee Wage Motion, infra.
18
The Debtors are also seeking in the DIP Motion authorization to make certain transfers to WEC EMEA entities.
That motion contains more detail on such transfers.
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BMO Harris Bank Account. As a result, to the extent the cash receipts
held at BMO Harris are transferred from a WEC subsidiary, an
Intercompany Transaction is recorded in the ERP System for the account
of that subsidiary.
b.
Disbursement Activities. Likewise, under the Cash Management System,
any disbursement made from the BMO Harris Bank Account on behalf of
a WEC subsidiary is recorded as an Intercompany Transaction, creating a
payable from such subsidiary.
c.
Expense Allocations. In the ordinary course of business, WEC U.S.
entities incur centrally-billed expenses, including insurance premiums,
workersâ compensation obligations, payroll and benefit costs, general
corporate services, and information technology costs. WEC pays these
expenses, thereby creating Intercompany Claims that are reflected on the
relevant entitiesâ balance sheets.
107.
All Intercompany Transactions are tracked electronically in the ERP
System. Transactions are concurrently recorded on each applicable entity balance sheet. The
accounting system requires that all general-ledger entries be balanced at the legal-entity level,
and, therefore, when the accounting system enters an intercompany receivable on one entityâs
balance sheet, it also automatically creates a corresponding intercompany payable on the
applicable affiliateâs balance sheet.
108.
Because the Debtors allocate shared expenses to the appropriate
entities and record all cash transfers at the legal-entity level, no Debtor will be subsidizing the
expenses of any other affiliate. To help ensure that each individual Debtor will not disadvantage
its creditors by funding the operations of its affiliates, the Debtors have requested that, pursuant
to sections 503(b)(1) and 364(b) of the Bankruptcy Code, the Court grant administrative expense
status to all Intercompany Claims against a Debtor that arise postpetition from Intercompany
Transactions.
109.
Bank Fees. In the ordinary course of their business, the Debtors incur
and pay, honor, or allow to be deducted from the appropriate Bank Accounts service charges and
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other fees, costs, and expenses charged by the Banks (collectively, the âBank Feesâ). The Bank
Fees collectively average approximately $20,000 per month. Additionally, if the balance in a
particular the Bank Account decreases below a threshold amount established by the applicable
Bank, the Debtors may incur additional fees for sending and receiving wire transfers, clearing
checks, automated clearinghouse transfers, and other transactions.
110.
Existing Business Forms.
In the ordinary course of business, the
Debtors use a variety of correspondence and business forms, including, among other things,
checks, purchase orders, invoices, and letterheads (collectively, the âBusiness Formsâ). To
minimize expenses, the Debtors seek authority to continue using all Business Forms substantially
in the forms used immediately prior to the commencement of these chapter 11 cases, without
reference to the Debtorsâ status as debtors in possession.
111.
Maintenance of the Cash Management System is critical to the
Debtorsâ ongoing operations and the successful execution of any business plan in chapter 11.
Modifications of and disruptions to the cash management system likely would cause significant
payment delays, impeded the Debtorsâ ability to efficiently track the flow of funds and obtain
important financial information, frustrate employees and vendors, and cause severe and
irreparable harm to the Debtorsâ businesses.
Ultimately, these outcomes would cause a
diminution in the value of the Debtorsâ estates to the detriment of all parties-in-interest.
(ii)
Employee Wage Motion
112.
Pursuant to the Motion of Debtors Pursuant to 11 U.S.C. §§ 105(a),
362(d), 363(b), and 507 and Fed. R. Bankr. P. 4001, 6003, and 6004 for Interim and Final
Authority to (I) Pay Prepetition Wages, Salaries, and Other Compensation and Benefits, (II)
Maintain Employee Benefit Programs and Pay Related Administrative Obligations, and (III) to
Authorize Banks to Honor and Process Related Checks and Transfers (the âEmployee Wage
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Motionâ), filed concurrently herewith, the Debtors seek entry of interim and final orders:
(i) authorizing, but not directing, the Debtors to pay or otherwise honor all prepetition
Compensation Obligations, Payroll Processing Obligations, Employee Bonus Obligations,
Reimbursable Expenses, Withholding Obligations, Employee Benefit Obligations, Pension and
Retirement Obligations, Employee Insurance Obligations, Employee Service Obligations,
Temporary Worker Benefits Obligations, and Staffing Agency Fees (each as defined herein and,
together with any related costs or expenses of administration, the âPrepetition Employee
Obligationsâ); authorizing, but not directing, programs, and policies for their Employees,
Temporary Workers, and Independent Contractors (each as defined herein), in effect as of the
date hereof and as those practices, programs, and policies may be modified, amended, or
supplemented from time to time in the ordinary course of the Debtorsâ businesses (the
âEmployee Programsâ), and honor any related administrative costs and obligations arising
thereunder (such obligations, collectively with the Prepetition Employee Obligations, the
âEmployee Obligationsâ); (iii) modifying the automatic stay to the extent necessary to permit
the Debtorsâ Employees and Temporary Workers to proceed with any claims they may have
under the Workersâ Compensation Programs (as defined herein), and (iv) authorizing Banks to
process and honor related transfers.
113.
The various components and approximate amounts of the unpaid
Prepetition Employee Obligations, each of which is discussed in further detail below, are
summarized in the following chart:
Category of Prepetition
Employee Obligation
Compensation Obligations
Payroll Processing
Obligations
Amount Seeking Authority
to Pay on Interim Basis
Amount Seeking Authority
to Pay on Final Basis
$4,500,000
$4,500,000
$205,000
$205,000
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Category of Prepetition
Employee Obligation
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Amount Seeking Authority
to Pay on Interim Basis
Amount Seeking Authority
to Pay on Final Basis
$300,000
$300,000
Reimbursable Expenses
$3,600,000
$7,200,000
Withholding Obligations
$750,000
$750,000
$4,520,000
$9,020,000
$750,000
$750,000
Staffing Agency Fees
$15,000,000
$27,000,000
Total Prepetition
Employee Obligations:
$29,625,000
$49,725,000
Employee Bonus
Obligations
Employee Benefit
Obligations
Temporary Worker Benefit
Obligations
114.
The Company employs approximately 9,190 Employees (as defined
below), primarily in the United States (with many employed at the Debtorsâ global headquarters
in Cranberry Township, Pennsylvania), but with a small number in Canada, Brazil, Europe, and
Asia. The Debtorsâ Employees include approximately (i) 2,265 full-time hourly Employees,
regularly scheduled to work a minimum of 40 hours per week (collectively, the âFull-Time
Hourly Employeesâ), (ii) 15 part-time hourly Employees, regularly scheduled to work fewer
than 40 hours per week (the âPart-Time Hourly Employeesâ and, together with the Full-Time
Hourly Employees, the âHourly Employeesâ), (iii) 6,555 full-time salaried Employees, who are
employed to work a minimum of 40 hours per week (the âFull-Time Salaried Employeesâ and,
together with the Full-Time Hourly Employees, the âFull-Time Employeesâ), (iv) 355 part-time
salaried Employees, who are employed to work fewer than 40 hours per week (the âPart-Time
Salaried Employeesâ and, together with the Part-Time Hourly Employees, the âPart-Time
Employees,â and the Part-Time Salaried Employees together with the Full-Time Salaried
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Employees, the âSalaried Employeesâ). The Hourly Employees and Salaried Employees are
collectively referred to herein as the âEmployees.â
115.
In addition to the Employees, PCI Energy Services LLC (âPCIâ)
employs approximately 904 temporary workers (the âTemporary Workersâ) who work
exclusively for the Operating Plant Business. The Debtors also engage independent contractors
(the âIndependent Contractorsâ) through the Staffing Agencies to work at the Debtorsâ various
plants and facilities, primarily for the Operating Plant Business.
Although the number of
Independent Contractors at any given time varies significantly, the Debtors estimate that on
average they spend approximately $15 million each month to engage Independent Contractors.
116.
Information regarding each Debtorâs Employees is summarized in the
following chart:
Total Number
of Employees
Full-Time
Employees
Part-Time
Employees
Salaried
Employees
Hourly
Employees
Fauske and
Associates LLC
69
68
1
69
0
Field Services,
LLC
5
5
0
5
0
PaR Nuclear,
Inc.
149
149
0
119
30
PCI Energy
Services LLC
9
9
0
9
0
Stone & Webster
Asia Inc.
57
57
0
18
39
Stone & Webster
Services LLC
1,362
1,321
41
1,054
308
Debtor
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Total Number
of Employees
Full-Time
Employees
Part-Time
Employees
Salaried
Employees
Hourly
Employees
WEC Carolina
Energy
Solutions, LLC
303
303
0
8
295
WEC Equipment
& Machining
Solutions, LLC
121
121
0
67
54
WEC Welding
& Machining,
LLC
26
26
0
17
9
WECTEC
Staffing Services
LLC
883
623
260
470
413
Westinghouse
Electric
Company LLC
6,143
6,075
68
5,011
1,132
Westinghouse
Industry
Products
International
Company LLC
53
53
0
53
0
CE Nuclear
Power
International,
Inc.
10
10
0
10
0
9,190
8,820
370
6,910
2,280
Debtor
Total
117.
Approximately 1,946 Employees work primarily for the Nuclear Fuel
Business, approximately 1,745 Employees work primarily for the Operating Plant Business,
approximately 21 Employees work primarily for the Decommissioning Business, approximately
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469 Employees work primarily for the Services Business, and approximately 2,311 Employees
work primarily for the Construction Business. In addition, 1,206 Employees provide central
corporate services to all of the Debtorsâ business lines, and 1,492 Employees work primarily in
the Debtorsâ engineering center of excellence.
118.
As of the Petition Date, approximately 713 of the Debtorsâ Employees
are represented by a union (the âUnion Employeesâ). Approximately 904 of Debtor PCI Energy
Services LLCâs (âPCIâ) Temporary Workers are also members of various national unions.
119.
The Debtors are party to three collective bargaining agreements (each,
a âCBAâ): (i) the Association of Westinghouse Salaried Employees (âAWSEâ) CBA, (ii) the
International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers and Helpers
(âNWBâ) CBA, and (iii) the International Brotherhood of Electrical Workers (âIBEWâ) CBA
(collectively, the âCBAs,â and AWSE, NWB, and IBEW, collectively, the âUnionsâ).
Approximately 386 of the Debtorsâ Salaried employees at the Cranberry Township headquarters
are party to the AWSE CBA, which expires in July 2017. Approximately 172 of the Debtorsâ
Employees at the Newington, Connecticut component manufacturing facility are party to the
NWB CBA, which expires in April 2017. Approximately 155 of the Debtorsâ Employees are
party to the IBEW CBA, which expires in July 2017.
120.
Information regarding the business lines and union membership of
each Debtorâs Employees is summarized in the following chart:
Debtor
Westinghouse
Electric Company
LLC
Business Line
Employee Count
Number of Union
Employees
Name of Union
Corporate Center
1,166
96
AWSE
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Business Line
Employee Count
Number of Union
Employees
Name of Union
PaR Nuclear, Inc.
Corporate Center
4
0
N/A
WEC Welding and
Machining, LLC
Corporate Center
23
0
N/A
Fauske and
Associates, LLC
Corporate Center
1
0
N/A
CE Nuclear Power
International, Inc.
Corporate Center
4
0
N/A
Westinghouse
International
Products
International
Company
Corporate Center
8
0
0
Westinghouse
Electric Company
LLC
Decommissioning
Business
21
0
N/A
Fauske and
Associates, LLC
Engineering Center
of Excellence
68
0
N/A
Westinghouse
Electric Company
LLC
Engineering Center
of Excellence
1,394
111
AWSE
PaR Nuclear, Inc.
Engineering Center
of Excellence
30
0
N/A
Westinghouse
Electric Company
LLC
Construction
Business
418
16
AWSE
CE Nuclear Power
International, Inc.
Construction
Business
6
0
N/A
Debtor
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Business Line
Employee Count
Number of Union
Employees
Name of Union
Construction
Business
45
0
N/A
PaR Nuclear, Inc.
Nuclear Fuel and
Components
Manufacturing
76
0
N/A
Westinghouse
Electric Company
LLC
Nuclear Fuel and
Components
Manufacturing
1,870
405
IBEW, AWSE,
NWB
WEC Welding and
Machining, LLC
Operating Plant
Business
3
0
N/A
PaR Nuclear, Inc.
Operating Plant
Business
39
0
N/A
PCI Energy Services
LLC
Operating Plant
Business
9
0
N/A
WEC Equipment &
Machining
Solutions, LLC
Operating Plant
Business
121
0
N/A
Westinghouse
Electric Company
LLC
Operating Plant
Business
1,270
84
AWSE
WEC Carolina
Energy Solutions,
LLC
Operating Plant
Business
303
0
N/A
Westinghouse
Electric Company
LLC
Services Business
4
0
N/A
Debtor
Westinghouse
International
Products
International
Company
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Business Line
Employee Count
Number of Union
Employees
Name of Union
Stone & Webster
Services LLC
Services Business
1,362
0
N/A
Stone & Webster
Asia Inc.
Services Business
57
0
N/A
WECTEC Staffing
Services LLC
Services Business
883
1
AWSE
Field Services, LLC
Services Business
5
0
N/A
Debtor
121.
The Employees, Temporary Workers, and Independent Contractors
perform a variety of critical functions for the Debtors, including tasks pertaining to engineering,
construction,
product
manufacturing,
facility
and
machine
maintenance,
testing,
decommissioning and decontaminating, quality assurance, management, purchasing and sales
administration, finance and accounting, human resources, customer service, safety, security, and
other areas crucial to the Debtorsâ businesses. Due to the highly technical and specialized nature
of the nuclear power industry, the skill and expertise of the Employees, Temporary Workers, and
Independent Contractors are fundamental to the success of the Debtorsâ businesses and
operations and, as a result, critical to these chapter 11 cases. Further, there is a limited supply of
workers with the specialization, training, certificates, and licenses that the Debtors require of
their Employees. For these reasons, it would be difficult and expensiveâif not impossibleâto
replace Employees who might quit or seek other employment if prepetition amounts are not paid.
A shortage of employees at this critical time would severely damage the Debtorsâ ability to meet
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the needs of customers to their Core Businesses, maintain the requisite safety standards, and
continue to innovate in a highly competitive industry, thus jeopardizing the entire reorganization.
122.
The Debtors estimate that, as of the Petition Date, the aggregate
amount of their unpaid Prepetition Employee Obligations is approximately $49,725,000, an
estimated $29,625,000 of which will come due in the period before the Final Hearing (the
âInterim Periodâ). The various components of the Employee Obligations are described in
further detail below.
A.
Compensation Obligations
123.
The Debtors pay their Employees and Temporary Workers salaries,
wages, and other compensation (including overtime pay) in exchange for the services they
provide (the âCompensation Obligationsâ). The Debtorsâ Salaried Employees typically receive
salary payments in arrears on a monthly basis on the last day of each month, with an option to
receive a mid-month advance on the business day nearest the 15th of the month. Most of the
Debtorsâ Hourly Employees receive bi-weekly payments for wages two weeks in arrears every
other Friday; however, certain of the Debtorsâ Hourly Employees receive wages on a weekly
basis one week in arrears every Thursday. All Employees are paid in U.S. dollars. Most
Employees are paid via direct deposit, although some Employees are paid via checks, which are
printed by third-party payroll management company ADP, LLC (âADPâ) and draw on ADP
accounts. On average, the Debtors pay approximately $90 million each month on account of
Compensation Obligations. As of the Petition Date, the Debtors estimate that the aggregate
amount of unpaid Compensation Obligations accrued prepetition totals approximately $4.5
million, all of which the Debtors seek authority to pay during the Interim Period.
124.
Payroll Processing Obligations. The Debtors use ADP to administer
payroll for their Employees and Temporary Workers and provide related payroll processing,
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payroll tax reporting, time entry systems, payment preparation, payroll transfer administration,
and other reporting and administrative services. In addition, the Debtors employ Bitta Group
Inc. (âBittaâ), which provides time entry systems and related services for Employees of
WECTEC Staffing Services, LLC (âStaffCoâ). WEC, on behalf of the Debtors, generally prefunds payroll to ADP two days prior to each payroll date, and ADP remits payments to
Employees in accordance with the payroll schedule described above. In addition, WEC transfers
funds to ADP as true-ups throughout the month to the extent the amounts funded by WEC for
Compensation Obligations do not equal the amounts remitted by ADP to the Employees. The
Debtors typically pay ADP approximately $125,000 each month and Bitta approximately
$80,000 per month (such administration costs, collectively, the âPayroll Processing
Obligationsâ). As of the Petition Date, the Debtors estimate that they owe approximately
$205,000 in Payroll Processing Obligations relating to the prepetition period to ADP and Bitta,
all of which will come due during the Interim Period.
125.
Employee Bonus Obligations. The Debtors have historically
maintained certain bonus programs as an additional component of the Employeesâ compensation
structure. The Employee Bonus Obligations are designed to compensate certain employees for
achieving certain performance goals and hiring and retaining the most effective employees for
the Company.
126.
The PowerUp Plan. In the ordinary course of business, the Debtors
maintain an employee recognition award bonus program in which all non-insider Employees
may participate (the âPowerUp Plan,â and the payments thereunder, the âPowerUp Bonusesâ).
The PowerUp Program is for rank-and-file Employees and excludes officers and directors.
Under the Power-Up Program, senior Employees nominate rank-and-file Employees to earn
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reward points based on an Employeeâs outstanding contribution or attitude at work. The awards
under the PowerUp Plan are granted daily and are paid in the form of points redeemable for
merchandise or gift cards. In addition, the Debtors pay a monthly administration fee to the
PowerUp Plan administrator, Globoforce Limited. The Debtors pay approximately $167,000 per
month under the PowerUp Plan and estimate that they owe approximately $100,000 in
prepetition amounts thereunder.
127.
The Retention Agreement Program.
In the ordinary course of
business, the Debtors maintain an incentive compensation program based on performance in
which approximately 140 non-insider Employees participate (the âRetention Agreement
Program,â and the payments thereunder, the âRAP Bonusesâ and, together with the PowerUp
Bonuses, the âEmployee Bonus Obligationsâ). RAP Bonuses are paid annually to Employees
who generally have performed well. Receipt of a RAP Bonus is not guaranteed and is subject to
a participating Employeeâs performance and continued employment at the Company. For fiscal
year 2017, the Debtors committed up to $3 million dollars for the Retention Agreement Program
and pay approximately $200,000 per month under the Retention Agreement Program. The
Debtors estimate that approximately $200,000 will come due under the Retention Agreement
Plan during the Interim Period.
128.
Reimbursable Expenses. In the ordinary course of their businesses, the
Debtors reimburse certain of their Employees, Independent Contractors, Temporary Workers,
and independent directors for reasonable and customary expenses incurred in the scope of their
services to the Debtors, including those expenses related to, among other things, business travel,
communications (e.g., cell phone expenses), and office supplies (collectively, and including
amounts due in respect of the Employee Credit Card Programs (as defined below), the
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âReimbursable Expensesâ). Employees must submit all expenditures in accordance with the
Debtorsâ travel and expense policy in order to qualify for reimbursement, and each request for
reimbursement is reviewed by a manager to ensure compliance.
Reimbursable Expenses
typically take between one and two weeks to process once the expense request is submitted.
129.
Withholding Obligations. As employers, the Debtors are required by
law to withhold from certain Employeesâ salaries, wages, and other compensation amounts
related to federal, state, and local income taxes, as well as Social Security and Medicare taxes
(collectively, the âWithholding Taxesâ) and to remit them to the appropriate taxing authorities
(collectively, the âTaxing Authoritiesâ). The Debtors are also required to make payments from
their own funds on account of Social Security and Medicare taxes and to pay, based on a
percentage of gross payroll (and subject to state-imposed limits), additional amounts to the
Taxing Authorities for, among other things, state and federal unemployment insurance
(collectively, the âEmployer Payroll Taxesâ and, together with the Withholding Taxes, the
âPayroll Tax Obligationsâ). In the aggregate, the Debtorsâ monthly Withholding Taxes and
Employer Payroll Taxes total approximately $25 million and $7 million, respectively.
130.
In the ordinary course of processing payroll for the Employees, the
Debtors may also be required by law, in certain circumstances, to withhold from certain
Employeesâ wages amounts for various garnishments, such as tax levies, child support, and other
court-ordered garnishments (collectively, the âGarnishmentsâ). Each pay cycle, the Debtors
withhold such amounts from applicable Employeesâ paychecks and remit them to the appropriate
authorities or entities.
On average, the Debtors withhold approximately $200,000 in
Garnishments per month from Employeesâ wages and salaries. In addition, the Debtors withhold
from Union Employeesâ paychecks and remit dues each month to ASWE, NWB, and IBEW in
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the aggregate amounts of approximately $11,200, $8,400, and $5,100, respectively (such dues,
collectively with the Payroll Tax Obligations and the Garnishments, the âWithholding
Obligationsâ).
131.
As of the Petition Date, the Debtors estimate that they owe
approximately $1.6 million in Withholding Obligations relating to the prepetition period, all of
which will come due during the Interim Period.
B.
Employee Benefits
132.
In addition to the aforementioned payment-related obligations, the
Debtors maintain various employment benefit plans and policies for their Employees, including:
(i) medical and dental plans; (ii) flexible spending and health savings accounts; (iii) retirement
plans and benefits; (iv) employee insurance; and (v) employee service programs (collectively,
the âEmployee Benefit Programsâ).
133.
Health Care Obligations. Employees are eligible to receive medical,
prescription drug, vision, dental, and other health care benefits (collectively, the âHealth Care
Benefits,â and the obligations relating thereto, the âHealth Care Obligationsâ). Except as
otherwise provided herein, Foreign Employees and Part-Time Employees who work fewer than
24 hours per week are not entitled to the Health Care Benefits.
134.
Medical Insurance.
The Debtors maintain two medical insurance
programs, the âWEC Medical Programâ and the âStaffCo Medical Programâ (together, the
âMedical Programsâ) for which Aetna Inc. (âAetnaâ) provides administrative services. The
WEC Medical Program, which covers approximately 6,925 Employees, is self-insured by the
Debtors, with a stop-loss policy that covers approximately 15% of participating Employees. As
part of the WEC Medical Program, the Debtors offer Employees prescription drug coverage
through CVS Caremark. In addition to payments made by the Debtors, Employees contribute to
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the WEC Medical Program via payroll deductions. The Debtors make weekly payments of
approximately $1.2 million under the WEC Medical Program, which payments operate on a lag
of four to six weeks, and the Debtors also receive quarterly rebates for prescription drugs, two
quarters in arrears, totaling approximately $3.2 million annually. The Debtors estimate that they
owe approximately $7.2 million in prepetition amounts on account of the WEC Medical
Program, $3.6 million of which will come due during the Interim Period.
135.
The StaffCo Medical Program, which covers approximately 300
StaffCo Employees who work at least 30 hours per week (the âStaffCo Benefits Employeesâ),
is fully insured by Aetna. The Debtors subsidize $250 per month per Employee on account of
StaffCo Medical Program premiums, and the remainder of the insurance premium amount is
purchased by the Employee. The Debtors estimate that they owe approximately $71,000 in
prepetition amounts on account of the StaffCo Medical Program, all of which will come due
during the Interim Period.
136.
The Debtors estimate that they remit additional monthly payments to
Aetna totaling approximately $900,000 on account of medical and stop-loss insurance and
administrative fees for the Medical Programs (the âAetna Medical Obligationsâ), all of which is
paid net of Employee contributions. As of the Petition Date, the Debtors estimate that they owe
approximately $9 million in Aetna Medical Obligations relating to the prepetition period, $4.5
million of which will come due during the Interim Period.
137.
Vision Service Plan. The Debtors offer certain Employees access to
vision coverage administered by Vision Service Plan (the âVision Programâ). The Vision
Program is fully insured and costs the Debtors approximately $1.2 million per year. The Debtors
generally split the cost of the Vision Service Plan with participating Employees. However, the
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Debtors do not pay any amounts under the Vision Program for StaffCo Benefits Employees. As
of the Petition Date, the Debtors estimate that they owe approximately $5,000 under the Vision
Program relating to the prepetition period, all of which will come due during the Interim Period.
138.
Dental Plan.
The Debtors provide certain Employees with dental
insurance (the âDental Programâ) through Metropolitan Life Insurance Co. (âMetLifeâ).
Approximately half of the cost of the Dental Program is withheld from participating Employeesâ
paychecks, and the other half is funded by the Debtors. The Debtors make monthly payments
totaling approximately $420,000 on account of the Dental Program. As of the Petition Date, the
Debtors estimate that they owe approximately $20,000 under the Dental Program relating to the
prepetition period, all of which will come due during the Interim Period.
139.
Employee Assistance Program. The Debtors provide their Employees
with counseling services (the âEAPâ) through Beacon Health Options (âBeaconâ). Employees
are eligible for up to five counseling sessions per issue per year. The Debtors pay Beacon
approximately $13,000 per month, one month in arrears, in connection with the EAP. As of the
Petition Date, the Debtors estimate that they owe Beacon approximately $13,000 on account of
the EAP, all of which will come due during the Interim Period.
140.
Flexible Spending Accounts & Health Savings Account. In addition to
offering the medical benefits described above, the Debtors offer certain Employees the option to
enroll in the following flexible spending accounts (each, an âFSA,â and the obligations related
thereto, the âFSA Obligationsâ) and/or a health savings account (each, an âHSA,â and the
obligations related thereto, the âHSA Obligationsâ): (i) the âHealthcare FSA,â for which third
party Hewitt Associates LLC (together with certain of its affiliates, âAon Hewittâ) provides
administrative services, which provides certain Employees with pre-tax reimbursement for
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qualified health care expenses not covered by insurance; (ii) the âLimited Purpose FSA,â for
which Aon Hewitt provides administrative services, which provides enrollees with pre-tax
reimbursement for dental and vision expenses not covered by insurance; (iii) the âDependent
Care FSA,â for which Aon Hewitt provides administrative services, which provides pre-tax
reimbursement for a participating Employeesâ eligible dependentsâ day care needs; and (iv) the
âEmployee HSA,â for which PayFlex Systems USA, Inc. (âPayFlexâ) provides administrative
services, which provides enrollees in a consumer-driven health plan with a tax-advantaged
medical savings account from which to pay eligible health care expenses not covered by
insurance.
141.
Under the terms of the FSAs and HSA, during the annual enrollment
period, eligible Employees may choose to designate an amount of their pre-tax wages or salary
towards the FSAs and/or HSA, which can then be used for eligible health care expenses. A
participating Employee will either submit receipts for such eligible expenses to the administrator
of the FSA or HSA, which then reimburses such Employee from his or her FSA or HSA, or use
special-purpose FSA or HSA debit cards.
Currently, approximately 2,300 Employees are
enrolled in an FSA and approximately 2,300 Employees are enrolled in an HSA. The Debtors
estimate that they remit payments totaling approximately $10,000 per month to Aon Hewitt for
FSA administration fees and approximately $10,000 per month to PayFlex for HSA
administration fees. As of the Petition Date, the Debtors estimate that they owe Aon Hewitt
approximately $10,000 for unpaid FSA Obligations, all of which will come due during the
Interim Period, and PayFlex approximately $10,000 for unpaid HSA Obligations relating to the
prepetition period, all of which will come due during the Interim Period.
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Retirement Benefits
142.
The 401(k) Plans. The Debtors maintain three qualified defined
contribution savings plans meeting the requirements of section 401(a) and 401(k) of the Internal
Revenue Code: (i) the Westinghouse Electric Company Savings Plan (the âWestinghouse 401(k)
Planâ), for which Aon Hewitt provides administrative services; (ii) the WECTEC 401(k) Savings
Plan (the âWECTEC 401(k) Planâ), for which Merrill Lynch provides administrative services;
and (iii) the WECTEC Staffing Services 401(k) Savings Plan (the âStaffCo 401(k) Planâ and,
collectively with the Westinghouse 401(k) Plan and the WECTEC 401(k) Plan, the â401(k)
Plans,â and the obligations thereunder, the â401(k) Plan Obligationsâ), for which Empower
Retirement provides administrative services. There are approximately 8,804 active Employees
enrolled in the Westinghouse 401(k) Plan, 2,162 active Employees enrolled in the WECTEC
401(k) Plan, and 500 active Employees enrolled in the StaffCo 401(k) Plan. There are 1,683 and
789 terminated vested former employees in the WEC 401(k) Plan and WECTEC 401(k) Plan,
respectively.
143.
The estimated weekly amount withheld from such Employeesâ
paychecks for contributions under the 401(k) Plans is approximately $1.8 million in the
aggregate.
With respect to the Westinghouse 401(k) Plan, the Debtors match Employee
contributions 50 cents on the dollar up to a maximum of 6% of pay and Debtors contribute 3% of
certain participating Employeesâ pay to a retirement contribution account (the âRCAâ). With
respect to the WECTEC 401(k) Plan, the Debtors match dollar-for-dollar up to 3% of pay and 50
cents per dollar on the next 2% of pay, for a maximum total match of 4% of pay. StaffCo does
not match contributions under the StaffCo 401(k) Plan. The Debtors estimate that they match
approximately $469,000 under the 401(k) Plans each week. As of the Petition Date, the Debtors
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owe approximately $125,000 in unpaid matching contributions to Employees under the 401(k)
Plans, all of which will come due during the Interim Period.
144.
NWB Pension Plan. The Westinghouse Pension Plan for Newington
Boilermakers (the âNWB Pension Planâ and, together with the 401(k) Plans, the âRetirement
Plans,â and the obligations thereunder, collectively, the âPension and Retirement Obligationsâ),
for which Aon Hewitt provides administrative services, is a flat dollar plan with 181 active
Union Employees, 51 terminated vested former employees, and 77 retirees. The Debtors are
required to meet minimum funding requirements totaling $1.2 million during fiscal year 2017,
with approximately $140,000 due each quarter and an additional $600,000 due on September 15,
2017. The Debtorsâ next contribution to the NWB Pension Plan is due on April 14, 2017. The
Debtors also pay an annual fee of approximately $732,000 to the Pension Benefit Guaranty
Corporation. As of the Petition Date, the Debtors owe approximately $140,000 on account of the
NWB Pension Plan, $140,000 of which will come due during the Interim Period.
D.
Employee Insurance Programs
145.
The Debtors also provide certain insurance coverage to Employees and
offer other additional insurance options (collectively, the âEmployee Insurance Programs,â
and the obligations related thereto, the âEmployee Insurance Obligationsâ).
146.
Salary Continuance and FMLA.
The Debtors offer short-term
disability coverage to eligible Salaried Employees (the âSalary Continuance Programâ). The
Debtor-insured, Aetna-administered Salary Continuance Program is intended to provide a benefit
to eligible Employees who cannot work as a result of a short-term injury or illness. The benefit
pays eligible Employees a six-month salary continuation of either 60% or 100% of base salary,
depending on the Employeeâs seniority. Pursuant to U.S. federal law in accordance with the
Family & Medical Leave Act (âFMLAâ), eligible Employees are also entitled to unpaid leave
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under certain circumstances. The Debtors pay approximately $20,000 in administration fees per
month to Aetna on account of the Salary Continuance Program and the FMLA Program. As of
the Petition Date, the Debtors owe approximately $300,000 in prepetition amounts pursuant to
the Salary Continuance Program, $220,000 of which will come due during the Interim Period.
147.
Workersâ Compensation.
In the ordinary course of business, the
Debtors maintain workersâ compensation insurance coverage (the âWorkersâ Compensation
Programsâ) for claims arising from or related to employment by the Debtors (the âWorkersâ
Compensation Claimsâ). In many instances, applicable law in the states in which the Debtors
operate requires that the Debtors maintain the Workersâ Compensation Programs. The Workersâ
Compensation Programs cover, among other things, workersâ compensation and employer
liability for accidents, death, or disease sustained by employees in the course of their
employment with the Debtors.
148.
The Debtors self-insure the Workersâ Compensation Programs up to
$500,000, and liabilities exceeding $500,000 are covered under a stop-loss policy provided by
Mitsui Sumitomo Insurance Group (âMitsuiâ).
In addition to out-of-pocket expenses and
premiums for the Workersâ Compensation Programs, the Debtors pay a yearly brokerage fee of
approximately $850,000 per year to Marsh USA, Inc. for insurance procurement services and
monthly fees of approximately $7,000 in the aggregate to Broadspire Services Inc. and Crawford
& Co. for administration of claims under the Workersâ Compensation Programs.
For the
coverage period ending on March 31, 2017, the Debtorsâ annual premium for the Workersâ
Compensation Program was approximately $868,000, which has been paid in full. As of March
28, 2017, the Debtors have approximately 75 open workersâ compensation claims. Historically,
the Debtors have spent approximately $119,000 per month on account of claims under the
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Workersâ Compensation Programs. As of the Petition Date, the Debtors estimate that they owe
approximately $100,000 in prepetition amounts with respect to the Workersâ Compensation
Programs, all of which will come due during the Interim Period.
E.
Employee Service Programs
149.
Benefits Advisory Services. Aon Hewitt maintains a call center to
assist Employees with any questions regarding the Employee Benefit Programs, maintains the
Debtorsâ benefits website and enrollment, and provides other related services as needed by the
Debtors (such services, collectively, the âBenefits Advisory Servicesâ). The Debtors pay Aon
Hewitt approximately $100,000 per month, two months in arrears, for the Benefits Advisory
Services. As of the Petition Date, the Debtors estimate that they owe Aon Hewitt approximately
$200,000 on account of Benefits Advisory Services, $100,000 of which will come due during the
Interim Period.
150.
Employee Relocation Program.
The Debtors routinely pay both
domestic and international relocation expenses for their Full-Time Employees (the âEmployee
Relocation Programâ). The Debtors primarily use Cartus Corp. and Parks Moving Companies
for relocation services, with some supplemental work by smaller local vendors. The Debtors
spend approximately $2.5 million annually in domestic relocation expenses and approximately
$7.0 million annually in international relocation expenses. These amounts are generally paid two
weeks in arrears. As of the Petition Date, the Debtors estimate that they owe approximately $1.2
million in prepetition amounts in connection with the Employee Relocation Program, $800,000
of which will come due during the Interim Period.
F.
Temporary Worker Union Benefits
151.
The Debtorsâ Temporary Workers are members of various unions (the
âTemporary Worker Unionsâ) in the United States. In accordance with the benefit plans of
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these Temporary Worker Unions, the Debtors make contributions of approximately $667,500 to
the Temporary Worker Unions for their Temporary Workers (such contributions, the
âTemporary Worker Benefit Obligationsâ). These amounts are paid to the Temporary Worker
Unions along with union dues withheld from Temporary Workersâ paychecks. As of the Petition
Date, the Debtors owe approximately $750,000 in prepetition Temporary Worker Benefit
Obligations, all of which will become due during the Interim Period.
152.
The Debtors utilize approximately 50 staffing agencies (the âStaffing
Agenciesâ) to fulfill temporary worker needs at their facilities through the Independent
Contractors. Although the number of Independent Contractors varies by season, the Debtors
typically utilize approximately 500 Independent Workers and pay an aggregate amount of
approximately $15 million to the Staffing Agencies each month (the âStaffing Agency Feesâ)
for the services of the Independent Contractors. The services of the Staffing Agencies and
Independent Contractors are vital to the Debtors because there is a limited pool of Independent
Contractors with the requisite clearance for nuclear plant access and special training for work in
the nuclear industry.
Training and clearance for Independent Contractors provided by the
Staffing Agencies typically takes at least six months and may take up to five years in some
instances. The Independent Contractors are necessary for the Debtors to provide services during
scheduled outages of nuclear plants as well as round-the-clock emergency support to operating
nuclear plants that have unplanned shutdowns and require immediate support to safely shut down
for necessary repairs. Any interruptionâeven a temporary oneâin the provision of services by
the Staffing Agencies and Independent Contractors would jeopardize the Debtorsâ value, public
safety, and the continuous provision of power to the public. As of the Petition Date, the Debtors
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estimate that they owe approximately $27 million in Staffing Agency Fees, $15 million of which
will come due during the Interim Period.
153.
Payment of the Prepetition Employee Obligations and continuation of
the Employee Programs are warranted and justified by the facts and circumstances of these
chapter 11 cases. The Employees are vital to the continued operation of the Debtorsâ businesses
and necessary for the success of these chapter 11 cases. Any delay in paying Prepetition
Employee Obligations or cessation of Employee Programs will adversely impact the Debtorsâ
relationship with their Employees as it could irreparably harm the Employeesâ morale,
dedication, confidence, and cooperation. Because many of the Employees interact with the
Debtorsâ customers and suppliersâon whose continued support and loyalty the Debtors relyâ
and perform safety functions, the Employeesâ support for the Debtorsâ reorganization efforts is
key to the Debtorsâ ongoing operations.
154.
Additionally, as set forth above, the importance of maintaining
stability among the Debtorsâ Employees is heightened here because there is a limited supply of
workers with the skills and knowledge, training, certificates, and licenses that the Debtors
require. Therefore, it would be difficult and expensive, if not impossible, to replace Employees
who might quit if prepetition amounts are not paid or Employee Programs were not continued.
Furthermore, a shortage of Employees could hamper the Debtorsâ ability to perform under
customer contracts and maintain the requisite safety standards. Instability among the Debtorsâ
Employees and the resultant harm to production would reduce the value of the Debtorsâ
businesses and lower creditor recoveries.
Moreover, absent an order granting the relief
requested, many Employees will suffer undue hardship and, in many instances, serious financial
difficulties. Thus, without the relief requested, the success of these chapter 11 cases may be
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undermined by the possibility that otherwise loyal Employees will seek other employment
alternatives.
155.
It is necessary to pay the administrative costs owed to third-party
vendors who provide compensation and other benefit-related services and products. Absent the
relief requested, the Debtors will be unable to maintain their compensation and benefit programs
in an efficient and cost-effective manner.
156.
In addition, it is essential that the Debtors be permitted to pay amounts
owed under the Workersâ Compensation Programs. The Debtorsâ failure to pay their obligations
under the Workersâ Compensation Program could jeopardize their coverage and expose the
Debtors to significant liability in fines by state workersâ compensation boards. Furthermore, the
risk that eligible workersâ compensation claimants would not receive timely payments for
prepetition employment-related injuries could negatively impact the financial well-being and
morale of not just those claimants but also the Debtorsâ active Employees. This could result in
Employee departures, causing a significant disruption in the Debtorsâ business with a materially
adverse impact on the Debtorsâ operations, the value of their estates, and the interests of all
parties in these chapter 11 cases.
157.
It is critical that the Debtors pay the fees to the Staffing Agencies for
work by the Independent Contractors. As described above, the Debtors rely on the Independent
Contractors to provide both scheduled and emergency services to nuclear plants.
Any
interruption in the services of these Independent Contractors could be catastrophic to the Debtors
and harmful to the public.
(iii)
Critical Vendors Motion
158.
By the Motion of Debtors Pursuant to 11 U.S.C. §§ 105(a), 363(b),
and 503(b)(9) for Interim and Final Authorization (I) To Pay Prepetition Obligations to Critical
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Vendors, Shippers, Warehousemen, Other Lien Claimants, and Foreign Creditors, (II)
Confirming Administrative Status for Certain Goods Delivered and Services Provided
Postpetition, and (III) Authorizing Financial Institutions to Honor and Process Related Checks
and Transfers (the âCritical Vendors Motionâ), pursuant to
sections 105(a), 363(b), and
503(b)(9) of the Bankruptcy Code, the Debtors seek entry of an order authorizing, but not
directing, the Debtors to (i) pay certain prepetition claims of certain vendors, suppliers, service
providers, and other similar entities that are essential to maintaining the going concern value of
the Debtorsâ enterprise (the âCritical Vendorsâ and their prepetition claims, the âCritical
Vendor Claimsâ); (ii) pay those prepetition charges to Shippers, Warehousemen, Equipment
Manufacturers, Tool Makers, and Other Lien Claimants (each as defined below and, collectively,
the âLien Claimantsâ) that the Debtors determine, in the exercise of their business judgment, to
be necessary or appropriate to obtain the release of inventory, supplies, goods, tools, equipment,
components, materials, or other items held by any Lien Claimants; and (iii) pay certain suppliers,
service providers, and other entities outside of the United States (collectively, the âForeign
Creditorsâ and their prepetition claims, the âForeign Claimsâ) in the ordinary course of
business, in each case, subject to the procedures and conditions described therein. The Debtors
also request that the Court (i) confirm administrative priority status of all undisputed obligations
of the Debtors owing to third party vendors and suppliers arising from the postpetition delivery
of goods and provision of services ordered prior to the Petition Date and (ii) authorize the
Debtors to pay such obligations in the ordinary course of business. Finally, the Debtors request
that the Court authorize all Banks to receive, process, honor, and pay all checks presented for
payment and electronic payment requests relating to the foregoing to the extent directed by the
Debtors in accordance with the Motion, whether such checks were presented or electronic
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requests were submitted before or after the Petition Date, and that all such Banks be authorized
to rely on the Debtorsâ designation of any particular check or electronic payment request as
appropriate pursuant to this Motion, without any duty of further inquiry, and without liability for
following the Debtorsâ instructions.
A.
Critical Vendors
159.
As discussed above, the Debtors operate a nuclear power business that
delivers a range of products and services to customers worldwide that span the full lifespan of a
nuclear power generatorâfrom construction to decommissioning and all maintenance in
between. The Debtors rely heavily on certain Critical Vendors to provide them with services
related to health and safety, specialized and unique parts, equipment, materials, and other
services necessary to conduct the business operations detailed above. Due to, among other
things, the specialized goods and services required to operate the Debtorsâ business lines and
maintain compliance with strict environmental, health, and safety regulations, the Debtors have
limited alternatives when going to market for necessary goods and services. Replacing such
vendors, even in the infrequent instances where possible, could result in substantially higher
costs for the Debtors and their estates and risk delays that could create safety and/or
environmental risks and harm the Debtorsâ value. Among others, the Debtors rely on the
following vendors to operate their five primary business lines:
â¢
The Nuclear Fuel and Component Manufacturing Business relies on
specialized suppliers to provide components to build fuel assemblies in
nuclear reactor vessels. Many of these suppliers are unique to the nuclear
industry and, in many cases, are unique to the Debtorsâ business
operations. The vast majority of these suppliers are the sole source of
components that are necessary for the Debtors to continue to operate the
Nuclear Fuel and Component Manufacturing Business.
â¢
The Operating Plant Business relies on several different types of suppliers
and service providers to provide custom-built equipment and essential
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services for nuclear operating plant upgrades, maintenance, inspection and
testing, and outage support. The equipment provided by these vendors
includes equipment specially-designed for use in the nuclear industry,
equipment designed for general commercial use but tested for suitability
for use in the nuclear industry, and equipment custom-designed and tested
for use specifically by the Debtors. Generally, it takes anywhere from six
months to four years to complete the qualification of equipment for use in
the nuclear industry. The Debtorsâ customers require that the Debtors use
the specific suppliers of proprietary tools and services to perform under
the Debtorsâ customer contracts. Accordingly, such vendors also provide
proprietary tools and services necessary to support such contracts. If the
Debtors were unable to obtain the required tools and services from these
specific vendors, the Debtors would be unable to comply with, and
perform under, many of their customer contracts. Goods and services
from these vendors are also necessary to enable the Debtors to provide
round-the-clock emergency support to operating nuclear plants that have
unplanned shut downs and require immediate support to safely shut down
for necessary repairs.
â¢
The Decommissioning Business relies on several different types of
vendors to survey radioactive sites and characterize radioactive materials,
as well as qualified vendors to safely handle, transport, and dispose of
such materials. The Decommissioning Business also requires the services
of vendors that have experience in engineering, planning, and carrying out
complex radioactive site remediation and decommissioning. These
include niche vendors who possess experience in nuclear decontamination
and decommissioning, and who provide protection to public safety by
reducing the risk of additional contamination through their remediation
services.
â¢
The WECTEC Services Business relies on a variety of vendors to provide
custom built equipment and essential services for nuclear operating plant
upgrades, maintenance, inspection and testing, and outage support as well
as support for U.S. government nuclear projects. Similar to the Operating
Plant Business, the equipment provided by these vendors is either
specially designed or qualified for use in the nuclear industry, which may
take up to four years to complete. Certain suppliers also provide
proprietary tools and services necessary to support the Debtorsâ customer
contracts.
â¢
The New Nuclear Plants / Major Projects and Construction Business relies
on special heavy manufacturing vendors for reactor vessels, steam
generators, reactor coolant systems, and plant support systems. All of
such equipment is specially designed for the New Nuclear Plants / Major
Projects and Construction Business in accordance with specialized
requirements, qualifications, and certifications. Additionally, certain
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vendors provide specialized electrical instrumentation and control systems
and computers which they design and qualify.
160.
As previously discussed, the Debtorsâ future involvement in
construction of the U.S. AP1000 Projects is uncertain. Accordingly, the Debtors do not expect to
pay prepetition claims of vendors that provide goods or services exclusively in connection with
the AP1000 business segment pursuant to the Critical Vendors Motion. However, the WECTEC
Services Business and the New Nuclear Plants / Major Projects and Construction Business rely
on vendors that provide goods and services to both the AP1000 and non-AP1000 business
segments (âOverlap Vendorsâ) that may refuse to continue providing goods and services to the
non-AP1000 projects if they are not paid in connection with the goods and services they provide
to the AP1000 projects.
Additionally, this category encompasses certain vendors and
professionals that provide services necessary for the Debtors to maintain numerous patents used
in connection with all five of their business lines, such as vendors who manage the Debtorsâ
international patent database and the Debtorsâ payment of its patent maintenance fees. The
Debtors propose to pay the Overlap Vendors if, in the Debtorsâ business judgment, the failure to
pay such claims would diminish the value of non-AP1000 projects or the Debtorsâ other business
lines, including by failing to maintain appropriate safety and/or environmental standards.
161.
Anticipating a situation where vendors become increasingly unwilling
to extend trade credit to the Company, the Debtors took painstaking efforts to ensure the stability
of the goods and services essential to their ongoing business prior to commencing these chapter
11 cases â including developing a narrowly-tailored critical vendor program. The process of
developing the critical vendor program involved a core, centralized team comprised of members
of the Debtorsâ purchasing and supply team with the assistance of AlixPartners and Weil and
was subject to the personal supervision of the Debtorsâ Vice President of Finance, Daniel
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Sumner. The Debtors will authorize payment only to those suppliers critical to the Debtorsâ
operations and subject to the vendorsâ own obligations to provide Customary Trade Terms (as
defined below).
162.
With the assistance of AlixPartners and Weil, the Debtors spent
significant time reviewing and analyzing their books and records, consulting operations
management and purchasing personnel, reviewing contracts and supply agreements, and
analyzing applicable laws, regulations, and historical practices to identify certain critical
business relationships and Critical Vendorsâthe loss of which could materially harm the
Debtorsâ businesses or impair going-concern viability. As a result of that analysis and review,
the Debtors have identified the following two general categories of Critical Vendors: (i) health
and safety suppliers and servicersâthe interruption of goods or services from these vendors
would either (a) cause environmental hazards or pose significant risk to the environment,
(b) pose a threat to health and public safety, or (c) compromise the Companyâs customersâ ability
to provide power to the electrical gridâand (ii) specialized servicers and suppliers to businesses
other than the U.S. AP1000 projectsâsole source suppliers, vendors unique to the nuclear
industry or the Debtorsâ specific business operations, suppliers of proprietary tools and services
necessary to support the Debtorsâ customer contracts, vendors with specialized qualifications, or
vendors that otherwise provide specialized goods or services related to the nuclear power
industry.
163.
The Debtors estimate that the aggregate amount owed to Critical
Vendors for goods delivered or services provided during the period before the Petition Date
should not exceed $87.3 million (the âCritical Vendor Capâ). Of this amount, the Debtors are
requesting authority to pay up to $58.9 million of Critical Vendor claims on an interim basis
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prior to a final hearing. Of these amounts, $11.5 million and $16.3 million are attributable to
claims under section 503(b)(9) of the Bankruptcy Code on an interim and final basis,
respectively.
B.
Lien Claimants
164.
In operating their businesses, the Debtors use and make payments to
specialized shippers qualified to deliver hazardous materials, common carriers, freight
forwarders and consolidators, delivery services, small parcel services, shipping auditing services,
and distributors (collectively, the âShippersâ) to ship, transport, and otherwise facilitate the
movement of inventory, supplies, merchandise, tools, equipment, components, materials, and
other items (collectively, the âGoodsâ), some of which are stored at third party warehouses (the
âWarehousemenâ and such payments, the âShipping and Warehousing Chargesâ).
165.
The services provided by the Shippers and Warehousemen are critical
to the Debtorsâ day-to-day operations.
If many of the Goods in transport are not timely
delivered, the Debtorsâ business operations would be brought to a halt, which could result in
nuclear plant shutdowns. Furthermore, many of the Goods in transport are critical to health and
safety. Accordingly, to maintain uninterrupted operations, the Debtors have implemented an
efficient system for the receipt of materials which relies heavily on third parties, including
Shippers and Warehousemen.
166.
At any given time the Debtors may owe the Shippers and
Warehousemen fees related to a number of different shipments and the Shippers may, in turn,
have multiple vehicles in transit carrying Goods on behalf of the Debtors. Accordingly, the
refusal of any Shipper or Warehouseman to perform could negatively impact the Debtorsâ
different business lines and create attendant risks to public health and safety.
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Because of the commencement of these chapter 11 cases, certain
Shippers and Warehousemen who hold Goods for delivery to or from the Debtors may refuse to
release the Goods pending receipt of payment for their prepetition services. Some state laws, a
Shipper or Warehouseman may have a lien on the Goods in its possession to secure the charges
or expenses incurred for the transportation or storage of Goods. Additionally, pursuant to section
363(e) of the Bankruptcy Code, the Shippers and Warehousemen, as bailees, may be entitled to
adequate protection as holders of possessory liens. As discussed, because of the Debtorsâ supply
needs, any delay in shipments would disrupt the Debtorsâ operations and could harm the
Debtorsâ reorganization efforts as well as pose a potential risk to health and safety.
168.
It is thus imperative that the Debtors be authorized to pay any
Shipping and Warehousing Charges, whether they arose prior to or after the Petition Date, that
the Debtors determine in their business judgment they must pay to ensure the uninterrupted
shipment and delivery of the Goods.
169.
Moreover, the Debtors routinely transact business with a number of
other third parties, including contractors, repairmen, and manufacturers who may assert tooling,
mechanicsâ, and other possessory liens (the âOther Lien Claimantsâ) against the Debtors and
their property if the Debtors fail to pay for the goods or services rendered. As discussed in more
detail below, the Other Lien Claimants perform a number of services for the Debtors, including
Equipment Manufacturers, Tool Makers, and Miscellaneous Other Lien Claimants (each, as
defined below).
C.
Equipment Manufacturers
170.
In the ordinary course of their businesses, the Debtors are required to
contract with third party equipment manufacturers (the âEquipment Manufacturersâ) to make
specialized equipment and parts needed by the Debtorsâ various business lines. The Debtors
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require the Equipment Manufacturersâ services for highly specialized components needed to
keep nuclear plants operational.
171.
Typically, the Equipment Manufacturers are paid at intervals based
upon progress or milestones relative to the completion of the item(s) they are manufacturing. To
the extent that the Debtors are unable to fulfill their payment obligations to the Equipment
Manufacturers, the Equipment Manufacturers may assert liens against the partially and/or fully
built equipment in their possession. Such actions could severely hinder the Debtorsâ ability to
fulfill production obligations to their customers on both existing and new programs.
D.
Tool Makers
172.
In the ordinary course of their businesses, the Debtors regularly
contract with independent tool and die shops (the âTool Makersâ), on behalf of both the Debtors
and the customers, for the production of specialized tools, moldings, fixtures, and special
machines necessary for producing and maintaining customer equipment. The selection and
qualification of a Tool Maker and the design and manufacture and qualification of tools can take
considerable time; in fact, it is not uncommon for this process to take over a year. Therefore, a
number of Tool Makers may be in the process of producing tools that the Debtors need to
continue existing lines of business.
173.
The Debtors typically pay for tools either by providing a deposit at the
beginning of the production process and the balance owed once production is complete or by
making progress payments to the Tool Makers throughout the production process. The Debtors
take possession of tools prior to paying the Tool Makers in full for such tools so that all
necessary quality and performance-related tests can be performed. Accordingly, the Debtors
have not yet fully paid for the majority of the tools being produced by the Tool Makers.
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Many states have legislatively granted Tool Makers security interests
in finished or unfinished tools. Moreover, the Debtors frequently contract with the same Tool
Makers to produce various tools for various product lines. The Debtors believe that, upon the
commencement of these chapter 11 cases, certain of the Tool Makers may, in enforcing their
state law rights, refuse to deliver new tooling in the future or return tooling that they are
servicing unless the Tool Makers are paid in full for such tools or provided assurance of future
payment. As such, the Debtorsâ are requesting that they be granted the authority, in their sole
discretion, to pay the Tool Makers for outstanding prepetition amounts owed.
E.
Miscellaneous Other Lien Claimants
175.
Numerous third parties render services related to the Debtorsâ property
at the Debtorsâ various facilities throughout the U.S. For example, the Debtors rely on third
parties to provide maintenance, calibration, stamping, refurbishment, and mechanic services.
Certain of these third parties may have the right to perfect state law statutory liens or mechanicsâ
liens on the Debtorsâ property and, thus, may be able to hinder the Debtorsâ use of property
needed to operate their businesses.
176.
To the extent any Other Lien Claimant has perfected a lien on any of
the Debtorsâ property or its customersâ property or, in the Debtorsâ estimation, could assert and
perfect a lien on any such property, it is imperative that the Debtors be authorized to immediately
pay such Other Lien Claimants regardless of whether their claims arose prior to or after the
Petition Date to secure the release of any such lien and the Debtorsâ continued uninterrupted
access to the goods and services provided by the Other Lien Claimants.
177.
As of the Petition Date, the Debtors estimate that approximately $23.5
million is owed to Lien Claimants (including Shippers, Warehouseman, and Other Lien
Claimants), approximately $16.8 million of which the Debtors expect to be due during the
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interim period prior to a final hearing. Of these amounts, $2.3 million and $3.2 million are
attributable to claims under section 503(b)(9) of the Bankruptcy Code on an interim and final
basis, respectively.
F.
Foreign Creditors
178.
In the ordinary course of conducting their businesses, the Debtors
incur various obligations to and rely on many of the Foreign Creditors, which are located in,
among other places, Belgium, Bulgaria, Canada China, Croatia, France, Germany, Israel, Italy,
Japan, Korea, Spain, Sweden, Switzerland, and the United Kingdom, to supply various goods or
services that are crucial to the Debtorsâ ongoing operations.
179.
Raw Material Suppliers. The Debtors utilize a significant amount of
raw materials in providing products and services to their customers, including, without
limitation, zirconium crystals, uranium, magnesium, and various castings and forgings. While
most of these raw materials are sourced from domestic companies, certain of the Debtorsâ raw
material suppliers are located outside the United States.
While the Debtors could seek
alternative raw material suppliers, any new supplier would likely charge the Debtors significant
premiums and price increases that would negatively impact the Debtorsâ liquidity and prospects
for a successful reorganization.
Additionally, the qualification process for some Foreign
Creditors can take up to 18 months. Therefore, the Debtors seek permission to pay these Foreign
Creditors that supply raw materials in order to keep operating costs low at a critical time in the
Debtorsâ reorganization and to meet customer delivery schedules.
180.
Equipment Suppliers. The Debtors also contract with several overseas
suppliers that provide fixtures and equipment that are utilized in the Debtorsâ business
operations.
As the Debtors operate in a highly specialized and technologically demanding
industry, there are only a few qualified suppliers the Debtors can rely on to provide equipment
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and components that meet the rigorous engineering specifications required by the Debtorsâ
customers. Moreover, several of these vendors also supply equipment that allows the Debtors to
safely run their business. For instance, some overseas suppliers provide tubing for components
that are necessary to ensure the safe operation of nuclear reactors. Failure to pay these Foreign
Creditors could result in hazards to the environment or health and safety. Although the Debtors
generally prepay some portion of their equipment supplier obligations prior to shipment, the
Debtors are seeking authority to pay any prepetition amounts owed to these Foreign Creditors
that supply equipment to continue operating safely and smoothly.
G.
Other Foreign Creditors
181.
As previously discussed, the Debtorsâ businesses utilize numerous
patents and trademarks. In addition to the Foreign Creditors above, the Debtors rely heavily on
services provided by law firms across the globe (without U.S. offices) that work to defend the
Debtorsâ intellectual property.
Failure to pay these Foreign Creditors may jeopardize the
Debtorsâ ability to maintain patents and trademarks that are vital to all five of the Debtorsâ
business lines.
182.
As of the Petition Date, the Debtors estimate that the amount of
prepetition claims owed to Foreign Creditors is approximately $20.1 million, approximately
$14.7 million of which the Debtors expect to be due during the interim period prior to a final
hearing. Of these amounts, $4.4 million and $6.3 million are attributable to claims under section
503(b)(9) of the Bankruptcy Code on an interim and final basis respectively.
183.
The Debtors are making every effort to avoid interruptions in the
supply chain and the adverse effects that even a temporary break in the supply chain could have
on their businesses. Any short term disruption could generate instability and thus jeopardize the
Debtorsâ ability to preserve their value. Because of the nature of the Debtorsâ businesses, many
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of the Foreign Creditors will make, or have made, credible actionable threats that, unless paid on
account of the prepetition debt, they will cease to supply the Debtors with the specialized goods
and services necessary to maintain the operation of the Debtorsâ businesses.
184.
Additionally, most of the Foreign Creditors have little or no
connection to the United States. Although the scope of the automatic stay set forth in section
362 of the Bankruptcy Code is universal, the Debtors may not be able to enforce the stay in
foreign jurisdictions if the creditor against whom enforcement is sought has minimal or no
presence in the United States. As a result, despite the commencement of these cases and the
imposition of the automatic stay, the Foreign Creditors may be able to immediately pursue
remedies and seek to collect prepetition amounts owed to them. Indeed, there is the real risk that
Foreign Creditors may attach or seize the Companyâs assets in their jurisdictionsâwhich would
significantly disrupt operations.
185.
In light of the potential for serious and irreparable consequences if the
Foreign Creditors do not continue to make uninterrupted and timely deliveries and/or take
actions outside the United States to collect on prepetition obligations the Debtors have
determined, in the exercise of their business judgment, that payment of certain Foreign
Creditorsâ claims is essential to avoid costly disruptions to the Debtorsâ operations and,
accordingly, the Debtors believe the relief requested in this motion should be granted.
186.
Payment Protocol for All Vendor Claimants. To minimize the amount
of payments required, the Debtors request authority to identify and pay particular Critical
Vendors, Lien Claimants, and Foreign Creditors (collectively, the âVendor Claimantsâ and
their prepetition claims, the âVendor Claimsâ), including Vendor Claimants with claims under
section 503(b)(9) of the Bankruptcy Code, utilizing the following payment protocol (the
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âPayment Protocolâ) which includes (i) routing requests for Vendor Claimant treatment through
a centralized control center staffed by specifically identified members of the Supplier
Management Committee, and assisted by professionals from AlixPartners and Weil; (ii)
reviewing any proposed payment on account of a prepetition claim for, among other things,
(a) the business need for the goods or services at issue; (b) the terms offered by the particular
vendor; (c) the amount of payment at issue; and (d) the existence of any contract requiring the
vendor to perform and the likelihood that the Debtors could compel performance in time to
prevent loss of value to the Debtorsâ businesses; (iii) requiring written approval of material
business terms (including proposed payments) by specifically-designated members of the
Debtorsâ management team, with any necessary assistance from the Debtorsâ professionals;
(iv) requiring all proposed payments of $450,000 to be approved by the Debtorsâ Vice President
of Finance; (v) requiring that all proposed payments be documented pursuant to an executed
vendor agreement in which the Vendor Claimant agrees to continue to supply goods or services
to the Debtors as well as any and all entities affiliated with the Debtors on âCustomary Trade
Termsâ for 24 months from the date of the agreement, with any specific exception from this
requirement to be made only with the express authorization of the Debtorsâ Vice President of
Finance and notice to counsel to the DIP Lenders; and (vi) permitting payment to only be
physically executed by specifically-designated members of the Debtorsâ finance department
when the Payment Protocol has been completed and upon presentation of completed
documentation. As used herein, âCustomary Trade Termsâ means industry trade terms and
existing contractual obligations between the parties, including rebates and discounts, and shall in
no event be worse than the most favorable terms and credit limits in effect within the 24 months
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before the Petition Date, or such other trade terms as agreed by the Debtors and the Vendor
Claimant.
187.
The Debtors believe that their deliberative process, combined with
their comprehensive Payment Protocol, justifies the relief requested in the Motion.
188.
Prepetition Purchase Orders. As of the Petition Date, the Debtors have
certain prepetition purchase orders (the âPrepetition Purchase Ordersâ) outstanding with
various third party vendors and suppliers (the âVendorsâ) for goods and/or services ordered by
the Debtors that have not yet been delivered to the Debtorsâ facilities or provided to the Debtors.
These Vendors may be concerned that, because the Debtorsâ obligations under the Prepetition
Purchase Orders arose prior to the Petition Date, such obligations will be treated as general
unsecured claims in these chapter 11 cases. Accordingly, certain Vendors may refuse to provide
goods and/or services to the Debtors purchased pursuant to the Prepetition Purchase Orders
unless the Debtors issue substitute purchase orders postpetition or obtain an order of the Court
(i) confirming that all undisputed obligations of the Debtors arising from the postpetition
delivery of goods and/or services subject to Prepetition Purchase Orders are afforded
administrative expense priority status under section 503(b) of the Bankruptcy Code and (ii)
authorizing the Debtors to satisfy such obligations in the ordinary course of business.
189.
As discussed above, any delay in the shipment or delivery of goods
and/or services could bring the Debtorsâ operations to a halt, harming the Debtorsâ businesses.
Further, as also discussed above, interruption could pose a significant risk to health and safety.
Although it is difficult to estimate the total amount due and owing under the Prepetition Purchase
Orders for goods and/or services that are not scheduled to be delivered or provided until after the
Petition Date, the Debtors submit that the total amount to be paid to the Vendors in connection
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therewith, if the relief requested herein is granted, is de minimis compared to the importance and
necessity of the goods and/or services provided.
(iv)
Taxes Motion
190.
Pursuant to the Motion of Debtors Pursuant to 11 U.S.C. §§ 105(a),
363(b), 507(a), and 541 and Fed. R. Bankr. P. 6003 and 6004 Authorizing (I) Payment of
Certain Prepetition Taxes and (II) Banks to Honor and Process Related Checks and Transfers
(the âTaxes Motionâ), the Debtors are requesting (i) interim and final authority to pay various
local, state, federal, and foreign taxing authorities (collectively, the âTaxing Authoritiesâ) all
Taxes (as defined below) that arose prior to the Petition Date, including all Taxes subsequently
determined by audit or otherwise to be owed for periods prior to the Petition Date, and (ii) that
the Court authorize, but not direct, the Banks to receive, honor, process, and pay all checks
issued or to be issued and electronic fund transfers requested or to be requested relating to the
above.
191.
The taxes and assessments to which the Debtors are typically subject
generally fall into the following categories, each of which is described in further detail in the
Taxes Motion: Franchise Taxes, Sales and Use Taxes, Property Taxes, Customs Duties,
Regulatory Fees, and Other Taxes (each herein defined and collectively, the âTaxesâ). The
Debtors pay the Taxes monthly, quarterly, or annually, in each case as required by applicable
laws and regulations. In the last 12 months, the Debtors paid approximately $53.0 million in
Taxes. The Debtors estimate that approximately $6.4 million in Taxes relating to the prepetition
period will become due and owing to the Taxing Authorities after the Petition Date, including
approximately $2.1 million during the interim period.
192.
The Taxes are summarized as follows and each Tax is discussed in
turn:
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Estimated Total Amount
Accrued as of Petition Date
Estimated Amount Due in
Interim Period
$500,000
$0
Sales and Use Taxes
$1,600,000
$1,600,000
Property Taxes
$1,700,000
$0
Regulatory Fees
$1,500,000
$0
Import/Export Taxes
$200,000
$200,000
Other Taxes
$900,000
$300,000
$6,400,000
$2,100,000
Category
Franchise Taxes
Total
193.
Franchise Taxes.
The Debtors are required to pay certain taxes
assessed for the privilege of doing business within a particular jurisdiction (collectively, the
âFranchise Taxesâ). The Franchise Taxes are typically paid annually, either in advance or in
arrears, to the applicable Taxing Authorities. The Debtors estimate that approximately $500,000
in Franchise Taxes relating to the prepetition period have accrued as of the Petition Date, none of
which will become due and owing in the interim period.
194.
Sales and Use Taxes. The Debtors are required in certain states to
collect and pay sales and use taxes (collectively, the âSales and Use Taxesâ). The Debtors
collect sales taxes from purchasers of their products and/or services on a per sale basis and
periodically remit the sales taxes to the applicable Taxing Authorities. The Debtors also incur
and collect use taxes, primarily when property or services are purchased from vendors that have
no nexus to the resident state of the Debtors. The Debtors are obligated to self-assess and pay
the use taxes, when applicable, to the states in which such purchasers operate. Sales and Use
Taxes are paid in arrears on a monthly, annual, semi-annual, or quarterly basis, depending on the
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state. If the Debtors do not pay the Sales and Use Taxes in accordance with their obligations,
then the Debtors will become liable for further amounts in the form of penalties. The Debtors
estimate that approximately $1.6 million in Sales and Use Taxes relating to the prepetition period
have accrued and/or been collected as of the Petition Date, all of which will become due and
owing in the interim period.
195.
Property Taxes. The Debtors own real and personal property located
throughout the country that is subject to state, county, and local property taxes (the âReal
Property Taxesâ and âPersonal Property Taxes,â respectively, and collectively, the âProperty
Taxesâ). The Real Property Taxes typically accrue on an annualized basis. Depending on the
jurisdiction in which the property is located, the Real Property Taxes are either paid in arrears or
for the current year, (annually, semi-annually, or quarterly).
The Personal Property Taxes
typically accrue on an annualized basis and are paid annually in arrears. The Debtors estimate
that approximately $1.7 million in Property Taxes relating to the prepetition period have accrued
as of the Petition Date, none of which will become due and owing in the interim period.
196.
Regulatory Fees. The Debtors are required to pay certain regulatory
assessments, permitting fees, licensing fees, levies, and federal, state, and other miscellaneous
fees or charges (collectively, the âRegulatory Feesâ).
The continued payment of these
Regulatory Fees is crucial to the continued operation of the Debtorsâ businesses. The Debtors
estimate that approximately $1.5 million in Regulatory Fees relating to the prepetition period
have accrued as of the Petition Date, none of which will become due and owing in the interim
period.
197.
Import/Export Taxes. The Debtors are required to pay certain customs
duties, tariffs, and other taxes, fees, and charges relating to the import and export of goods
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(collectively, the âImport/Export Taxesâ). The continued payment of these Import/Export
Taxes, including any such Taxes due and owing on account of prepetition Other Taxes, is crucial
to the continued operation of the Debtorsâ businesses. The Debtors estimate that they owe
approximately $200,000 on account of Import/Export Taxes relating to the prepetition period, all
of which will become due and owing in the interim period.
198.
Other Taxes. In the ordinary course of business, the Debtors may
collect, withhold, or incur other miscellaneous taxes, fees, or charges (collectively, the âOther
Taxesâ). The Debtors estimate that approximately $900,000 in Other Taxes relating to the
prepetition period have accrued as of the Petition Date, of which $300,000 will become due and
owing in the interim period.
199.
Audits.
The amounts of the Taxes listed above are good-faith
estimates based on the Debtorsâ books and records and remain subject to potential and ongoing
audits and other adjustments.
200.
The Debtors seek to pay the prepetition Taxes to, among other things,
discourage the Taxing Authorities from taking actions that may interfere with the Debtorsâ
continued business operations. Nonpayment of these obligations may cause Taxing Authorities
to take precipitous action, including, but not limited to, asserting liens, seeking to lift the
automatic stay, or revoking or suspending necessary licenses, any of which would disrupt the
Debtorsâ day-to-day operations and could potentially impose significant costs on the Debtorsâ
estates.
201.
Failure to satisfy the prepetition Taxes may also jeopardize the
Debtorsâ maintenance of good standing to operate in the jurisdictions in which they do business.
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Failure to make timely payment of certain Taxes may result in the interruption of the Debtorsâ
business operations.
202.
The Debtors file approximately 176 tax returns monthly within the 44
states in which they have a tax nexus. The failure to remit prepetition Taxes, such as Sales and
Use Taxes, significantly increases the Debtorsâ officersâ and directorsâ exposure to possible
personal liability during the pendency of these chapter 11 cases. The threat of a lawsuit or
criminal prosecution, and any ensuing liability, would distract the Debtors and their officers and
directors from important tasks during a critical time. This would be detrimental to parties in
interest because the dedicated and active participation of the Debtorsâ officers and directors is
integral to the Debtorsâ continued operations and essential to the orderly administration of these
chapter 11 cases.
(v)
KCC Retention Application
203.
By the Application of Debtors Pursuant to 28 U.S.C. § 156(c), 11
U.S.C. § 105(a), and Local Rule 5075-1 for Entry of an Order Appointing Kurtzman Carson
Consultants LLC as Claims and Noticing Agent for the Debtors (the âKCC Retention
Applicationâ), pursuant to section 156(c) of title 28 of the United States Code, section 105(a) of
the Bankruptcy Code, and Local Rule 5075-1, the Debtors request authority to appoint Kurtzman
Carson Consultants LLC (âKCCâ) as claims and noticing agent in the Debtorsâ chapter 11 cases,
in accordance with the terms and conditions of that certain engagement agreement dated as of
March 27, 2017, effective nunc pro tunc to the Petition Date.
204.
The Debtors request entry of an order appointing KCC as the Claims
and Noticing Agent for the Debtors and their chapter 11 cases, including assuming full
responsibility for the distribution of notices and the maintenance, processing, and docketing of
proofs of claim filed in the Debtorsâ chapter 11 cases. Although the Debtors have not yet filed
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their schedules of assets and liabilities, they anticipate that there will be approximately 35,000
entities to be noticed. In view of the number of anticipated claimants and the complexity of the
Debtors' businesses, I believe that the appointment of KCC as claims and noticing agent is in the
best interests of both the Debtors' estates and their creditors.
(vi)
Interim Assessment Agreement Approval Motion
205.
Pursuant to the Interim Assessment Agreement Approval Motion, the
Debtors seek authorization under section 105(a) of the Bankruptcy Code to enter into (i) the VC
Summer Interim Assessment Agreement between WEC, WECTEC, and the VC Summer Owners
and (ii) the Vogtle Interim Assessment Agreement between WEC, WECTEC, and the Vogtle
Owners. The Interim Assessment Agreements are cost-neutral and cash-neutral to the Debtors,
and are in the best interests of the Debtors and their estates.
VI.
Information Required Pursuant to Local Rule 1007-2
206.
In accordance with Local Rule 1007-2, the schedules attached hereto
provide certain information related to the Debtors.
207.
Pursuant to Local Rule 1007-2(a)(3), Schedule 1 hereto lists the
names and addresses of the members of, and attorneys for, any committee organized prior to the
Commencement Date and a brief description of the circumstances surrounding the formation of
the committee and the date of its formation.
208.
Pursuant to Local Rule 1007-2(a)(4), Schedule 2 hereto lists the
holders of the Debtorsâ thirty (30) largest unsecured claims on a consolidated basis, excluding
claims of insiders.
209.
Pursuant to Local Rule 1007-2(a)(5), Schedule 3 hereto lists the
holders of the four (4) largest secured claims against the Debtors on a consolidated basis.
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Pursuant to Local Rule 1007-2(a)(6), Schedule 4 hereto provides a
summary of the (unaudited) consolidated assets and liabilities for the Debtors.
211.
Pursuant to Local Rule 1007-2(a)(7), Schedule 5 hereto provides the
following information: the number and classes of shares of stock, debentures, and other
securities of the Debtors that are publicly held and the number of record holders thereof; and the
number and classes of shares of stock, debentures, and other securities of the Debtors that are
held by the Debtorsâ directors and officers, and the amounts so held.
212.
Pursuant to Local Rule 1007-2(a)(8), Schedule 6 hereto provides a list
of all of the Debtorsâ property in the possession or custody of any custodian, public officer,
mortgagee, pledgee, assignee of rents, secured creditor, or agent for any such entity, giving the
name, address, and telephone number of each such entity and the location of the court in which
any proceeding relating thereto is pending.
213.
Pursuant to Local Rule 1007-2(a)(9), Schedule 7 hereto provides a list
of the premises owned, leased, or held under other arrangement from which the Debtors operate
their businesses.
214.
Pursuant to Local Rule 1007-2(a)(10), Schedule 8 hereto provides the
location of the Debtorsâ substantial assets, the location of their books and records, and the nature,
location, and value of any assets held by the Debtors outside the territorial limits of the United
States.
215.
Pursuant to Local Rule 1007-2(a)(11), Schedule 9 hereto provides a
list of the nature and present status of each action or proceeding, pending or threatened, against
the Debtors or their property where a judgment against the Debtors or a seizure of their property
may be imminent.
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Pursuant to Local Rule 1007-2(a)(12), Schedule 10 hereto provides a
list of the names of the individuals who comprise the Debtorsâ existing senior management, their
tenure with the Debtors, and a brief summary of their relevant responsibilities and experience.
217.
Pursuant to Local Rule 1007-2(b)(1)-(2)(A), Schedule 11 hereto
provides the estimated amount of weekly payroll to the Debtorsâ employees (not including
officers, directors, stockholders, and partners) and the estimated amount to be paid to officers,
stockholders, directors, members of any partnerships, and financial and business consultants
retained by the Debtors for the thirty (30) day period following the filing of the Debtorsâ Chapter
11 Cases as the Debtors intend to continue to operate their businesses.
218.
Pursuant to Local Rule 1007-2(b)(3), Schedule 12 hereto provides, for
the thirty (30) day period following the filing of the Chapter 11 Cases, a list of estimated cash
receipts and disbursements, net cash gain or loss, obligations, and receivables expected to accrue
that remain unpaid, other than professional fees.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing
is true and correct.
Dated: March 29, 2017
New York, New York
/s/ Lisa J. Donahue
Name: Lisa J. Donahue
Title: Chief Transition and Development Officer
Westinghouse Electric Company LLC
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Exhibit A
Corporate Organizational Chart
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TOSHIBA CORPORATION
Organizational Chart
87%
KEY
Main Document
87%
IHI CORPORATION
3%
3%
TOSHIBA NUCLEAR ENERGY
HOLDINGS (US) INC.
Debtor
TOSHIBA NUCLEAR HOLDINGS
(UK) LIMITED
10%
Non-Debtor
Affiliate
NATIONAL ATOMIC COMPANY
KAZATOMPROM
10%
TSB NUCLEAR ENERGY USA
GROUP INC.
WESTINGHOUSE ELECTRIC UK
HOLDINGS LIMITED
TSB NUCLEAR ENERGY
SERVICES INC.
WEC EMEA ENTITIES
Non-Debtor
Joint Venture
*All ownership interests are 100% unless otherwise indicated
WESTINGHOUSE ELECTRIC
COMPANY LLC
55%
KW NUCLEAR
COMPONENTS CO., LTD.
60%
WESTRON
WESTINGHOUSE TECHNOLOGY
LICENSING COMPANY LLC
WESTINGHOUSE
INTERNATIONAL TECHNOLOGY
LLC
FAUSKE AND ASSOCIATES LLC
CE NUCLEAR POWER
INTERNATIONAL, INC.
PAR NUCLEAR HOLDING CO.,
INC.
WEC ENGINEERING SERVICES
INC.
PAR NUCLEAR, INC.
WESDYNE INTERNATIONAL LLC
WUHAN HUIXIN
ENGINEERING
TECHNOLOGY CO. LTD.
MID-AMERICA
CONVERSION SERVICES,
LLC
48%
WEC SPECIALTY LLC
33%
WECTEC LLC
WECTEC STAFFING SERVICES
LLC
WECTEC GLOBAL PROJECT
SERVICES INC.
WESTINGHOUSE GOVERNMENT
SERVICES LLC
70%
NUCRANE
MANUFACTURING, LLC
NUCLEAR TECHNOLOGY
SOLUTIONS LLC
WESTINGHOUSE ENERGY
SYSTEMS LLC
20%
FIELD SERVICES, LLC
WESTINGHOUSE INDUSTRY
PRODUCTS INTERNATIONAL
COMPANY LLC
SHAW GLOBAL SERVICES, LLC
STONE & WEBSTER
INTERNATIONAL INC.
WEC WELDING AND MACHINING,
LLC
WEC EQUIPMENT & MACHINING
SOLUTIONS, LLC
SHAW NUCLEAR SERVICES, INC.
WEC CAROLINA ENERGY
SOLUTIONS, LLC
STONE & WEBSTER SERVICES
LLC
PCI ENERGY SERVICES LLC
STONE & WEBSTER
CONSTRUCTION INC.
WEC CAROLINA ENERGY
SOLUTIONS, INC.
STONE & WEBSTER ASIA INC.
WECTEC CONTRACTORS INC. fka
CB&I Contractors, Inc.
FLUOR|WESTINGHOUSE
LIQUID WASTE
SERVICES, LLC
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Schedule 1
Committees
Pursuant to Local Rule 1007-2(a)(3), to the best of the Debtorsâ knowledge and
belief, no committee has been organized prior to the Commencement Date.
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Schedule 2
Pursuant to Local Rule 1007-2(a)(4), the following is a list of creditors holding, the thirty (30) largest, unsecured claims against the Debtors, on a consolidated
basis, excluding claims of insiders as defined in 11 U.S.C. § 101.
Name of creditor and complete mailing address,
including zip code
Name, telephone number, and email address
of creditor contact
Nature of the claim (for
example, trade debts, bank
loans, professional services,
and government contracts)
Indicate if claim is
contingent,
unliquidated, or
disputed
Amount of unsecured claim
If the claim is fully unsecured, fill in only unsecured claim amount. If
claim is partially secured, fill in total claim amount and deduction for
value of collateral or setoff to calculate unsecured claim.
Total claim, if partially
secured
FLUOR ENTERPRISES INC (FEI)
100 Fluor Daniel Drive
Greenville
SC
29607
US
CB&I LAURENS INC
366 Old Airport Rd
Laurens
SC
29360
US
NEWPORT NEWS INDUSTRIAL CORP
182 Enterprise Dr
Newport News
VA
23603-1368
US
NUCLEAR FUEL SERVICES INC
1205 Banner Hill Rd
Erwin
TN
37650-9318
US
VIGOR
9460 Se Lawnfield Rd.
Clackamas
OR
97015
US
THOMPSON CONSTRUCTION GROUP IN
100 North Main Street
Sumter
SC
29150
US
RSCC WIRE & CABLE LLC
20 Bradley Park Rd
East Granby
CT
06026-9789
US
CURTISS WRIGHT
13925 Ballantyne Corporate Place, Suite 400
Charlotte
NC
28277
US
NEWPORT NEWS INDUSTRIAL CORP
182 Enterprise Dr
Newport News
VA
23603-1368
US
Unsecured claim
$0
$0
$193,891,735
$0
$0
$145,000,000
Trade Debts
$0
$0
$32,806,489
Trade Debts
$0
$0
$18,463,053
Trade Debts
$0
$0
$10,086,210
Trade Debts
$0
$0
$8,345,458
Trade Debts
$0
$0
$8,027,241
Trade Debts
$0
$0
$7,931,485
Trade Debts
$0
$0
$7,782,122
Trade Debts
$0
$0
$5,479,722
Trade Debts
Pat Selvaggio
Pat.Selvaggio@Fluor.com
Deferred Purchase Price
CB&I
One CB&I Plaza, 2103 Research Forest Drive
The Woodlands
TX
77380
US
Deduction for value of
collateral or setoff
Contingent
Lee Pressley
(815) 342-3905
lpresley@CBI.com
Rick Crow/Project Manager
864-683-3962
Rick.crow@cbi.com
Steve Napiecek/VP & GM
757-870-2463
Steve.Napiecek@hii-nns.com
Frank Masseth
423-735-5661
fxmasseth@nuclearfuelservices.com
Corey Yraguen/President
503-314-0859
Corey.Yraguen@vigor.net
William Gryant, VP
864-643-9592
 bbryant@thompsonind.com
Mark St. Onge / Director of Strategic
Accounts
203-645-2275
Mark.stonge@r-scc.com
David C. Adams, CEO
704-869-4667
dadams@CURTISSWRIGHT.com
Matt Gorman/GM
412-777-2101, ext 320
mgorman@ssmi.biz
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Name of creditor and complete mailing address,
including zip code
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Pg 93 of 109 Indicate if claim is Amount of unsecured claim
Name, telephone number, and email address Nature of the claim (for
of creditor contact
example, trade debts, bank contingent,
loans, professional services, unliquidated, or
and government contracts) disputed
If the claim is fully unsecured, fill in only unsecured claim amount. If
claim is partially secured, fill in total claim amount and deduction for
value of collateral or setoff to calculate unsecured claim.
Total claim, if partially
secured
AECON INDUSTRIAL
150 Sheldon Drive
Cambridge
N1R 7K9
CND
Douglas Page, President
770-595-7691
dpage@wisgrp.com
GEXPRO
1000 Bridgeport Ave
Shelton
CT
06484
US
Dan Collins
412-877-0267
Dan.Collins@gexpro.com
RESEARCH COTTRELL COOLING INC
58 East Main Street
Somerville
NJ
08876
US
GARNEY COMPANIES INC
5895 Shiloh Road, Suite 114
Alpharetta
GA
30004
US
ACCENTURE LLP
K&L Gates Center 210 6th Ave. 25th Floor
Pittsburgh
PA
15222-2614
US
OWEN INDUSTRIES INC
501 Avenue H
carter Lake
IA
51510
US
DUBOSE NATIONAL ENERGY SERVICE
900 Industrial Dr
Clinton
NC
28328-8068
US
STEELFAB INC
8623 Old Dowd Rd.
Charlotte
NC
28214
US
CSC COMPUTER SCIENCES CORP
1775 Tysons Blvd
Mc Lean
VA
22102-4284
US
ENVIROVAC HOLDINGS LLC
486 Old Louisville Road
Garden City
GA
31408
US
Unsecured claim
Trade Debts
$0
$0
$5,465,543
Trade Debts
$0
$0
$5,153,942
Trade Debts
$0
$0
$5,087,626
Trade Debts
$0
$0
$5,012,335
Trade Debts
$0
$0
$4,386,505
Trade Debts
$0
$0
$3,762,101
$0
$0
$3,494,139
Trade Debts
$0
$0
$3,410,946
Trade Debts
$0
$0
$3,358,718
Trade Debts
$0
$0
$3,151,617
Trade Debts
$0
$0
$3,090,237
Trade Debts
$0
$0
$3,040,135
Ian Turnbull/Sr. VP
519-240-5487
iturnbull@aecon.com
WILLIAMS SPECIALTY SERVICES LL
100 Crescent Centre Parkway
Tucker
GA
30084
US
SMCI
4015 Drane Field Rd
Lakeland
FL
33811-1290
US
Deduction for value of
collateral or setoff
Bob Marshall/EVP & CFO
423-413-1582
Bob.marshall@metaltek.com
John Urbaniak
John.urbaniak@rc-cooling.com
Greg Harris
(770) 754-4141
gharris@garney.com
Trade Debts
Contingent
Mark Sobota
mark.sobota@accenture.com 724-7879807
Tyler Owen/President
402-290-1481
towen@owenind.com
Richard Rogers/VP and GM
910-590-2151
Richard.rogers@dubosenes.com
Glen Sherrill/President
704-604-6603
GSherrill@steelfab-inc.com
Rick Beroth
336-399-9825
rberoth@csc.com
Ann Brown
912-964-0660
ann@envirovac.us
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Name of creditor and complete mailing address,
including zip code
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Pg 94 of 109 Indicate if claim is Amount of unsecured claim
Name, telephone number, and email address Nature of the claim (for
of creditor contact
example, trade debts, bank contingent,
loans, professional services, unliquidated, or
and government contracts) disputed
If the claim is fully unsecured, fill in only unsecured claim amount. If
claim is partially secured, fill in total claim amount and deduction for
value of collateral or setoff to calculate unsecured claim.
Total claim, if partially
secured
AMERICAN EQUIPMENT CO
2106 Anderson Road
Greenville
SC
29611
US
VALLEN
900 Sunset Blvd
West Columbia
SC
29169-6860
US
HERC RENTALS
6230 S Loop E
Houston
TX
77087
US
SIEMENS INDUSTRY INC
4620 Forest Ave
Cincinnati
OH
45212-3306
US
CALVERT COMPANY INCORPORATED
3100 West 7th Street, Suite 500
Fort Worth
TX
76107
US
JONES LANG LASALLE AMERCIAS INC
200 E Randolph St Ste 4300
Chicago
IL
60601-6519
US
EATON CORP
8609 Six Forks Rd
Raleigh
NC
27615-2966
US
MARTIN MARIETTA MATERIALS
Dba Martin Marietta Aggregates
Columbia
SC
29033
US
Deduction for value of
collateral or setoff
Unsecured claim
Trade Debts
$0
$0
$3,018,565
Trade Debts
$0
$0
$2,948,212
Trade Debts
$0
$0
$2,846,014
Trade Debts
$0
$0
$2,824,817
Trade Debts
$0
$0
$2,614,441
Trade Debts
$0
$0
$2,582,841
Trade Debts
$0
$0
$2,475,281
Trade Debts
$0
$0
$2,434,753
Dean Smith, VP Operations
864.354.9520
dean.smith@ameco.com
Cantey Haile
Cantey.Haile@vallen.com
James Fiscus, VP Sales
832-414-0236
james.fiscus@hercrentals.com
Scott Conner - VP & General Manager
540-314-7009
scott.conner@siemens.com
Douglas Calvert / Presiden
(912) 293-2278
sambarr@azz.com
Matt Gonterman / CIO
312 228 2142
matt.gonterman@am.jll.com
General Counsel
Roselyn R. Bar - Executive Vice President
& General Counsel
(919) 783-4603
roselyn.bar@martinmarietta.com
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Schedule 3
Holders of the four (4) largest secured claims against the Debtors on a consolidated basis
Pursuant to Local Rule 1007-2(a)(5), to the best of the Debtorsâ knowledge and
belief, there are no liquidated secured claims against the Debtors.
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Schedule 4
Condensed Consolidated Balance Sheet (Unaudited)
Condensed & Consolidated Balance Sheet
Rounded to millions (USD)
2/28/2017
Assets
Current Assets
Cash and Cash Equivalents
Accounts Receivable
Allowance for Doubtful Accounts
Inventories, Net
Costs and Estimated Earnings in Excess of Billings
Other Current Assets
Total Current Assets
$
1/28/2017
106 $
657
(2)
295
563
464
3/31/2016
80 $
470
(2)
312
601
476
2/29/2016
120 $
428
(1)
287
1,477
262
42
596
(1)
314
1,116
211
$
2,083
$
1,937
$
2,573
$
2,278
$
617
512
984
133
$
621
512
988
117
$
686
742
1,035
497
$
688
742
1,039
400
$
4,329
$
4,175
$
5,533
$
5,146
$
624
1,720
4,007
1,363
$
694
1,678
4,091
1,125
$
489
1,770
28
699
$
417
1,599
32
592
$
7,714
$
7,588
$
2,986
$
2,640
$
128
521
291
737
$
128
516
291
726
$
124
489
298
664
$
128
538
247
717
$
9,391
$
9,249
$
4,561
$
4,270
$
3,677 $
(8,543)
(196)
-
3,676 $
(8,554)
(196)
-
3,680 $
(2,498)
(210)
-
Total Equity
$
(5,062) $
(5,074) $
972
$
877
Total Liabilities + Shareholder's Equity
$
5,533
$
5,146
Noncurrent Assets
Plant, Property & Equipment - Gross, Net
Goodwill
Other Intangible Assets, Net
Other Noncurrent Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Billings in Excess of Costs and Estimated Earnings
Reserve for Contract Loss
Other Current Liabilities
Total Current Liabilities
Noncurrent Liabilities
Reserves for Decommissioning Matters
Benefit Obligations
Deferred Income Tax Liabilities
Other Noncurrent Liabilities
Total Liabilities
Equity
Capital Stock
Retained (Deficit) Earnings
Accumulated Other Comprehensive Loss
Noncontrolling Interests
4,329
$
4,175
$
3,569
(2,488)
(204)
-
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Main Document
Schedule 5
The Debtors' Securities
Pursuant to Local Rule 1007-2(a)(7), the Debtors do not have any publicly traded stock, debentures, or securities.
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Main Document
Schedule 6
Debtorsâ Property Not in the Debtorsâ Possession
Local Rule 1007-2(a)(8) requires the Debtors to list property that is in the possession or