How Predictive Purchase Behavior Identified the Risk Sooner
Once the nation’s largest nuclear power company, Westinghouse Electric Company was a commonly known name, bringing electricity to the majority of the public during the late 1800’s. Fast forward over a hundred years: Westinghouse created an AP1000 pressurized water reactor with the intention to cut the costs and complexity out of building nuclear plants, thus accelerating these types of projects throughout the U.S. and the rest of the world. But those plans came to a screeching halt last week when Westinghouse filed for Chapter 11 Bankruptcy.
Amid costly roadblocks which have presented themselves during recent projects, Westinghouse received $800 million in debtor-in-possession financing from a third-party lender to use for financial restructuring. The company has been under financial turmoil for years, costing its creditors and parent company Toshiba more than they bargained for in money and time.
Back in 2006, Westinghouse seemed like a strong investment for Toshiba, which bought the company for $5.4 billion. Shortly after, Scana Energy and Georgia Power commissioned two new nuclear power plants in South Carolina and Georgia. What all of these creditors didn’t know is that Westinghouse was having trouble staying financially afloat.
Westinghouse continued paying its bills on time, exuding the illusion that they were worthy of trade credit and other financial investments. The projects commissioned by Scana and Georgia Power have exceeded projected costs by over $1 billion and gone on three years past schedule. Unfortunately, what many creditors didn’t see, is that Westinghouse’s payment behavior wasn’t painting the full picture.
Westinghouse is a prime example of a company that continued to pay on time, yet showed other, less traditional signs of a financial downfall. Westinghouse slowed their spending across all major industries, including Materials, Operations and Shipping. Companies who show such a significant drop in their purchase behavior should be considered especially risky. For Scana and Georgia Power, it was too late. They are currently negotiating next steps to ensure the projects are completed.
Over the course of a year, Westinghouse’s purchase behavior was captured and reported within Cortera’s database. Shown below are the downward trends of Westinghouse’s spend in Operations and Shipping, signaling a struggle beneath the payment surface.
Even prior to 2016, Westinghouse was showing signs of risk. Cortera’s predictive purchase behavior was picking up on these trends for three consecutive years.
Westinghouse, a name once known for its powerful influence within the nuclear power industry, has suddenly illustrated the loss of control that one businesses’ demise can cause for so many others. Poor management, financial distress and poor business decisions have each aided to the downfall of this nuclear power business. As with any industry, making risky decisions puts your business and those you work with at a major financial risk.
For more information on Cortera’s unique purchase behavior, and to find out if your customers are a credit risk, request to be contacted by a Cortera representative here: http://see.cortera.com/get-more-information
*all images included in this post were sourced from the Westinghouse Electric Company Deep Dive Credit Report