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Private equity firms Blackstone Group LP
A successful deal would limit the financial hit to Japan's Toshiba Corp <6502.T>, the owner of Westinghouse. Westinghouse filed for bankruptcy in March, hit by billions of dollars of cost overruns at four nuclear reactors under construction in the U.S. Southeast.
Westinghouse is working with investment bank PJT Partners Inc
Other private equity firms are also considering forming consortia to bid for Westinghouse. Buyout firm Cerberus Capital Management LP is in talks with U.S. nuclear power plant component provider BWX Technologies Inc
Other bidders are also expected to emerge. However, the Committee on Foreign Investment in the United States (CFIUS), a government panel which scrutinizes deals for potential national security risks, could make an acquisition of Westinghouse by a foreign buyer more difficult, according to the sources.
The sources asked not to be identified because details of the sale process are confidential.
A Westinghouse spokeswoman said the company had started the process to exit bankruptcy through a sale or by securing an investment, but declined to comment on the company's valuation or potential bidders. Westinghouse has previously said it is hoping to exit bankruptcy early next year.
PJT and BWX Technologies did not immediately respond to requests for comment, while Blackstone, Apollo and Cerberus declined to comment.
Construction of nuclear power plants has slowed down around the world following the 2011 Fukushima accident, and as the cost of renewable power sources plummets.
However, private equity firms see value in Westinghouse's relatively stable business of servicing nuclear power plants that are up and running. Westinghouse's business for sale has 12-month earnings before interest, taxes, depreciation and amortisation of around $400 million, according to the sources.
Toshiba reached a similar agreement for $3.7 billion in June with the utilities, led by a unit of Southern Co
Apollo is already an investor in Westinghouse, having agreed to provide $800 million in debtor-in possession financing during the bankruptcy. Blackstone has owned several power assets, including a nuclear power plant in South Texas that was part of its Texas Genco LLC portfolio, which it sold in 2006.