Aug. 13 (Bloomberg) -- Kansai Electric Power Co., Japan's second-biggest utility, may halt all its 11 nuclear reactors for inspections, four days after a ruptured steam pipe at its Mihama No. 3 reactor killed four workers.

Kansai Electric stopped three of its reactors after the accident, and may close the other eight in stages, Tomohide Saito, a spokesman for the Osaka-based company, said in a phone interview.

The shutdowns may force Kansai Electric to rely on plants that use gas, oil and coal to maintain supply to customers at a time when crude-oil and coal prices are at record highs. Last year, Tokyo Electric Power Co., Asia's biggest utility, had a fiscal first-quarter loss because fuel costs surged when it was forced to close all its reactors because of safety concerns.

``Kansai Electric could see fuel costs rise by a significant amount, which may hurt its profit this fiscal year,'' said Tatsuya Tsunoda, a senior analyst at Mizuho Securities Co. in Tokyo, who has a ``hold'' rating on the utility's shares. ``I don't see them shutting all the reactors immediately. They may wait until fall when power demand isn't as high.''

Kansai Electric produces about 56 percent of its electricity from nuclear power plants, according to the Federation of Electric Power Companies of Japan. Thermal power stations that use oil, liquefied natural gas or coal account for 30 percent.

``If the eight reactors are closed, we need to look into how we can supply electricity to avoid power outages,'' Kansai Electric's Saito said.

Shares

Shares of Kansai Electric fell as much as 11 yen, or 0.6 percent, to 1,989 on the Tokyo Stock Exchange, compared with a decline of as much as 0.3 percent in the 16-member Topix Electric & Gas Index. The shares dropped 2.7 percent on Tuesday, their biggest fall in more than 10 months.

The price of Dubai crude oil, an Asian benchmark, was $38.09 a barrel yesterday, 36 percent higher than a year earlier, according to Bloomberg data. Prices of LNG and C-grade fuel oil, also used to fire power plants, are indexed to crude oil prices.

Kansai Electric uses LNG, natural gas that has been cooled for transport by ship, in more than half its thermal plants. Those plants generate about a third of the company's electricity.

The utility, which supplies electricity to the cities of Osaka and Kobe, forecasts group net income of 125 billion yen ($1.12 billion) for the full year ending March 31, 2005, on sales of 2.48 trillion yen.

Police Probe

Police are investigating a ruptured pipe that leaked steam, fatally burning workers at the No. 3 reactor of Kansai Electric's Mihama nuclear power station in Fukui prefecture, north of Osaka. The workers were preparing to shut down the reactor for scheduled maintenance.

The 28-year-old carbon-steel steam piping system at the Mihama plant, made from 10 millimeter (0.39 inch) thick steel and rated for a working life of 30 years, had worn down to 1.4 millimeters, the company said on Wednesday.

Japan's Nuclear and Industry Safety Agency started inspections at the Mihama plant at about 9 a.m. local time, Kyo Morishita, an official at the agency said in a phone interview.

Tokyo Electric was forced to restart more expensive oil- and gas-fired power plants because the government ordered all its nuclear reactors shut by April 2003 for safety checks after employees were found to have falsified documents for a decade.

The utility reported an 8.6 billion yen loss in the three months ended June 30 last year when just two of its 17 nuclear reactors were operating. It had first-quarter profit of 54.2 billion yen this year after restarting 13 reactors.

To contact the reporters on this story: Meggan Richard in Tokyo at mrichard3@bloomberg.net. Hector Forster in Tokyo at hforster@bloomberg.net.

Last Updated: August 12, 2004 22:39 EDT