Tokyo Electric Power Co. (9501), owner of the crippled Fukushima reactors, is committed to restarting another nuclear plant next year that is the world’s largest and itself was damaged in a 2007 earthquake.
Bringing the Kashiwazaki Kariwa power station online, even though it sets up the state-controlled utility for further conflicts with a nuclear-weary public, is part of “Plan A,” President Naomi Hirose, 59, said in an interview. The plan refers to a 10-year business reconstruction that handed control of the power company known as Tepco to Japan’s government.
“We have no choice right now but to do our best to carry out Plan A,” Hirose said on June 18. “We don’t have a Plan B.”
Tepco’s decision runs counter to polls showing the majority of Japanese want less reliance on atomic power after meltdowns at its Fukushima Dai-Ichi reactors last year. The radiation release and cost to the public of as much as $138 billion sparked anti-nuclear sentiment across the world. Germany decided to shut all its plants, Italy scrapped a plan to build reactors, and China, with the largest atomic-building program, imposed a temporary halt on approving projects while it reviewed safety.
In Japan, all 50 reactors, including the seven at Kashiwazaki Kariwa, have been required to pass so-called stress tests introduced to improve safety after the Fukushima disaster. Only two near the western city of Osaka have won permission to resume operations, leaving 48 offline.
“Tepco’s plan is only wishful thinking” because no more reactors are likely to be approved this year, said Tomoko Murakami, a Tokyo-based nuclear analyst at the Institute of Energy Economics, Japan. “Without the restart, there is not much hope to revive the company.”
Restarting the Kashiwazaki Kariwa nuclear plant and raising power prices are the key planks of the plan that includes a 1 trillion yen ($12.6 billion) bailout. Delaying the restart or power price increases by more than a year may force the government to increase the bailout, Hirofumi Kawachi, a Tokyo- based analyst at Mizuho Investors Securities Co.
“We have to steadily carry out the first steps of the business plan,” said Hirose, who was officially approved yesterday as the utility’s new president by shareholders and the board of directors.
Those first steps are unlikely to be as steady as Hirose hopes for.
Hirohiko Izumida, governor of Niigata prefecture, where the Kashiwazaki Kariwa plant is located, has said the Fukushima nuclear accident should be fully investigated before approving the restart of the world’s biggest atomic station. Tepco said restarting one of the reactors at Kashiwazaki Kariwa will save it about 78 billion yen a year.
Seventy-one percent of respondents to a Mainichi newspaper poll published on June 4 objected to a speedy restart of Kansai Electric Power Co.’s reactors at Ohi. The restart was approved on June 18. In a separate poll released June 5 by the Pew Research Center, 70 percent of Japanese said the country should reduce its reliance on atomic energy and 52 percent feared they or their families may have been exposed to radiation.
“It is, and should be, possible for electricity utilities not to rely on nuclear power in the long term, 30 or 40 years later,” Kazuhiko Shimokobe, Tepco’s new chairman, told reporters in Tokyo today. “But it’s difficult to think of Tepco and other utilities without nuclear power in the time span of five or 10 years while maintaining stable electricity supply.”
Shareholders of Japan’s utilities including Tepco and Kansai Electric rejected proposals to abandon or reduce their dependence on nuclear power generation at annual general meetings held across Japan yesterday. Nuclear power provided about 30 percent of Japan’s electricity prior to the Fukushima disaster.
The utility may be forced to scale down and delay power rate increases due to criticism by a government panel assessing Tepco’s request to raise tariffs by 10.28 percent from July 1, the Nikkei newspaper reported on June 21.
To gain public support, the turnaround plan calls for cutting costs by 3.65 trillion yen over 10 years. Tepco also pledged to reduce fuel costs as Japan increasingly relies on thermal power generation with reactors offline.
“As we want to buy fuels at a low price even more than our customers do, every measure to lower our fuel costs should be taken. Shale gas is one possibility,” Hirose said. “But shale gas won’t solve everything.”
Efforts to join Japanese companies in buying natural gas assets overseas, including shale gas in the U.S. and Canada, may be hindered by a lack of funds, Hirose said. Tepco’s bailout included a 1 trillion yen loan.
“One of our strong points used to be fundraising capacity,” Hirose said. “It will be critically challenging.” One option may be to acquire upstream assets with other Japanese companies and seek state financing, he said.
Tepco, state-owned Japan Oil, Gas & Metals National Corp. and their partners on June 18 agreed to jointly buy 10 percent of Chevron Corp. (CVX)’s Wheatstone field licenses and 8 percent in the processing facilities near Onslow in Western Australia state. In a preliminary agreement signed in December 2009, Tepco said it would acquire 15 percent of the licenses and 11.25 percent of the plants.
Buying upstream assets “is certainly an effective option. I have no doubt that it is one of the solutions” to lower fuel costs, Hirose said.