Idled reactors leave operators in the red

November 01, 2012


Eight of Japan's 10 major power companies posted heavy financial losses over a half-year period due to the cost of buying more oil and gas to operate thermal plants while nuclear reactors remain idle.

The eight utilities reported a total loss of 673.6 billion yen ($8.44 billion) in the six months through September. All major utilities reported their half-year earnings by Oct. 31.

"Why has it worked out this way, even though it was not us who caused the accident?" said one senior official of Kansai Electric Power Co., a company that is facing a particularly heavy depreciation cost related to its idled reactors.

Only two companies posted a net profit: Okinawa Electric Power Co., which has no nuclear plants, and Hokuriku Electric Power Co., which relied on nuclear power for only a small share of its total output.

Four utilities logged their worst-ever losses. These were Kansai Electric, Hokkaido Electric Power Co., Shikoku Electric Power Co. and Kyushu Electric Power Co.

Tokyo Electric Power Co. posted a loss of almost 300 billion yen, with 235.8 billion yen spent on compensation costs related to the accident last year at its Fukushima No. 1 nuclear plant.

The five utilities, plus Tohoku Electric Power Co., paid no midterm dividends.

The utilities have been spending heavily on increased procurements of liquefied natural gas and crude oil to sustain higher output from thermal power plants. Fuel costs for the 10 companies amounted to 3.4 trillion yen in the six-month period, up 40 percent year on year.

In addition, the companies posted a 150 billion yen cost for depreciation, which relates to recovery of nuclear-plant construction expenses, and for the maintenance of idled reactors.

The utilities also gave gloomy earnings forecasts for the full year through March 2013.

Four companies—Tohoku Electric, TEPCO, Chubu Electric Power Co. and Hokuriku Electric--are projecting losses. Tohoku Electric alone forecasts a net loss of 100 billion yen.

Five companies, including Kansai Electric, offered no earnings and dividend estimates, saying they could not forecast when reactors restarts may take place. Forty-eight of Japan's 50 reactors remain offline.

Although utilities have been urging restarts, they appear unlikely until at least next summer because the Nuclear Regulation Authority, the body tasked with assessing whether to give the green light for restarts, plans to release new safety standards only in July 2013.

Because of this, Hokkaido Electric, Tohoku Electric and Shikoku Electric suggested on Oct. 31 that they would raise electricity prices for users.

So far, Kansai Electric and Kyushu Electric have declared that they will hike rates from next spring, following the example of TEPCO, which increased prices in September.

TEPCO, which continues to deal with Japan's worst nuclear accident, still hopes it will be able to restart other reactors.

On Oct. 31, the company posted its first earnings since it received a massive bailout with public money in July.

The utility has revised upward its earnings estimates. It said the net loss for this fiscal year is expected to be 45 billion yen, compared with the 160 billion yen the company projected in August. The change reflects a decrease in compensation payments.

TEPCO sees the restart of its Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture as the key to turning around its finances. That restart was a central element of the restructuring plan it submitted in order to receive public money.

The utility wants to bring all of the plant’s seven reactors online beginning in April 2013. TEPCO says each active reactor saves 78 billion yen a year in fuel costs for thermal plants.

But the April restarts are looking unattainable because of the July date for new safety standards, and because of the need to obtain local consent.

(This article was compiled from reports by Kentaro Uechi, Hiroshi Takata, Naoki Tsuzaka, Junki Watanabe and Mari Fujisaki.)

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