Will Apple’s Overseas Billions Help Westinghouse Complete New Nuclear Plants?
A Friday report from NHK, Japan’s public broadcasting company, announced that Apple might join Foxconn in a coordinated bid for a majority stake in Toshiba, the world’s second largest supplier of flash memory chips. None of the companies involved has confirmed the report.
If the move results in a successful investment bid, it could have a major positive impact on electricity customers in Georgia and South Carolina. It might also help fund a recovery path out of a fraught attempt by the U.S. nuclear energy enterprise to restore its atrophied capability to build large, reliable, emission-free nuclear plants in the United States.
Apple Has Some Of the World’s Deepest Pockets
As of the end of December 2016, Apple reported a cash balance of $241 billion with 94% of it – $230 billion – overseas. It has continued to add to that growing pile of cash overseas mainly because it has not paid U.S. corporate taxes on the related earnings. Repatriating it under current provisions in the tax code would require a large payment to the federal government.
Many pundits have speculated about what Apple could do for jobs and industry if it was encouraged to bring that cash into the U.S.. There have been rumblings credited to the Trump Administration about the possibility of a temporary tax amnesty program to incentivize Apple – and other America-based global giants with similar overseas stockpiles – to bring some of their resources home.
Given the potential for a large movement of money out of overseas bank accounts, Apple observers have been talking about U.S. companies that might be acquisition targets. Many of the mentioned targets would either not make much strategic sense or would raise anti-trust flags even under an accommodating administration.
Overseas Investments Logically Escape U.S. Taxman
Like any well-managed company, Apple is not counting on the government making any changes to current law. It’s logical to believe that the company might be seriously investigating the possibility of direct investments or acquisitions in companies that are headquartered outside the U. S.
Direct overseas investments would deploy the cash pile into a use that might be more lucrative than collecting the tiny amounts of interest currently paid to all savers, including large, successful corporations.
Apple has a long standing working relationship with Toshiba and most likely has a number of fans within Toshiba. In 2005, during the exciting stages of the iPod era, Apple made a long term purchase commitment – which came with a substantial cash advance – that enabled Toshiba and other flash memory suppliers to make the investments that have led to a technological revolution and a reliably profitable business segment.
Both Apple and Toshiba have profited from the relationship over the years. In 2011, Apple stopped buying flash memory from Samsung, indicating that its components no longer met the company’s evolving requirements as it improved its products. That decision shifted more sales volume to Toshiba.
Apple has a strong motive for seeking to ensure Toshiba’s continued viability as well-capitalized, innovative and capable chip manufacturer. After a five year hiatus in buying from Samsung, sources like MacRumors indicate that Apple is again using Samsung chips in some of its phones. Even though it has returned to Apple’s approved supplier list, Samsung is Apple’s primary competitor in the mobile device hardware business.
No company wants to be in a situation of dramatically increased dependence on a competitor to supply key components of a major product.
How Would This Investment Help Electricity Customers In Georgia And South Carolina?
Several years ago Toshiba, as Westinghouse’s large, profitable and then stable parent company, provided substantial guarantees in the case of cost overruns for both the Vogtle and Summer projects. Each of those projects, one in Georgia and one in South Carolina involves the construction of two of Westinghouse’s flagship AP1000 nuclear power plants. According to recent document filings, the total amount of Toshiba’s guarantees is about $4 billion.
Toshiba would like to complete the projects and successfully demonstrate the value of the AP1000 technology. Even though the company has indicated that it no longer wants to be in the nuclear plant construction business, it is still very interested in being a part of the nuclear power plant engineering, manufacturing, fuel supply, and services business. That business line will have a much greater potential for future profits after the first units begin operating.
Both Southern Company’s Georgia Power unit and SCANA, as the lead utilities in each consortium building the power plants, are in an evaluation phase to determine if the plants can and should be finished. Even though there is still due diligence that needs to be completed to identify as much as possible about the current state of the project and the resource expenditure required to complete the plants, both companies have indicated that their top choice going into the decision process is completing the plants.