Japan Utilities Limit Losses on Higher Rates, Fuel Cost Cuts

Photographer: Tomohiro Ohsumi/Bloomberg

The No. 3, left, and No. 4, reactor buildings stand at Kansai Electric Power Co.'s Takahama nuclear power station at dusk in Takahama Town, Fukui Prefecture, Japan. Close

The No. 3, left, and No. 4, reactor buildings stand at Kansai Electric Power Co.'s... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

The No. 3, left, and No. 4, reactor buildings stand at Kansai Electric Power Co.'s Takahama nuclear power station at dusk in Takahama Town, Fukui Prefecture, Japan.

Japan’s nuclear utilities narrowed losses after raising power prices, a nascent sign of recovery in an industry trying to show regulators their reactors are safe.

Tokyo Electric Power Co. (9501), the operator of the wrecked Fukushima Dai-Ichi nuclear reactor, posted a smaller operating loss in the fiscal first quarter, as did Kansai Electric Power Co. (9503) The two companies, which serve 42.3 million people in Japan, cut operating losses by a combined 198.03 billion yen ($2.03 billion), according to earnings statements yesterday.

The improved results came as the companies offset the effect of the weaker yen on import prices by tapping cheaper energy sources, while acknowledging some of their nuclear fleets would have to be restored for their businesses to recover.

“There’s no other way for us to become profitable,” Naomi Hirose, Tokyo Electric’s president, said at a press conference yesterday. “We recognize that will be difficult, though.”

Tepco, as Tokyo Electric is commonly known, raised household rates by about 8.5 percent in September 2012. Kansai Electric raised its rates 9.75 percent starting May 1.

The utilities gained government approval for the rate increases by saying they were necessary to cope with rising fuel bills. Fuel costs for Japan’s 10 regional utilities rose 2.7 percent to 1.7 trillion yen in the quarter, the companies said.

Rate Increases

The government is set to approve rate increases of 8 percent to 9 percent for three utilities, the Nikkei newspaper reported today. Economy, Trade and Industry Minister Toshimitsu Motegi and Masako Mori, the minister of state for consumer affairs, will agree on the increases later today, with the measure taking effect on Sept. 1.

The rate hikes, along with reactor restarts, will be necessary if utilities are to stop losing money, said Yuji Nishiyama, an analyst with JP Morgan Securities Japan Co.

“They are still in the red and their shareholder equity is still eroding,” Nishiyama said. “They’re not out of the woods yet.”

Tepco shares ended today’s session up 48 yen, or 8 percent, at 647 yen, while Kansai Electric shares rose 27 yen, or 2.3 percent, to close at 1,227 yen. All but one of the 17 members of the Topix Electric Power & Gas Index gained.

Tepco pared fuel expenses by about 100 billion yen by buying coal-fired electricity from Tohoku Electric Power Co. (9506) and generating power at two new coal plants of its own, Hirose said.

Yen Weakening

The moves helped Tepco limit the increase of its total fuel costs to 11.7 billion yen, despite the depreciated yen that has driven up import prices, Hirose said. The company’s 636.3 billion yen fuel bill for the period was still the company’s record high for a first quarter, Hirose said.

That’s largely due to the depreciation of Japan’s currency, which has boosted the cost of importing the oil, gas and coal that has replaced atomic power, he said. Japan’s currency traded at an average of 98.76 yen to the dollar in the April-to-June period, up 23 percent from 80.09 yen a year earlier.

Kansai Electric, meanwhile, limited the increase in its fuel bill to 1 percent, partly through the resumption of two reactors at its Ohi nuclear plant, which enabled Japan’s second-biggest utility to use less fossil fuel.

The utility, Japan’s most dependent on nuclear, was without any atomic power from Feb. 21, 2012, when the No. 3 reactor at its Takahama plant was idled for safety checks, until July 5 of that year, when the No. 3 unit at the Ohi plant began generating electricity again.

Reactor Checks

The Ohi No. 3 unit, along with the plant’s No. 4 unit, which restarted July 18, are currently the only operating reactors in Japan. The country’s remaining 48 functioning reactors remain shuttered for safety checks after the March 11, 2011 earthquake and subsequent tsunami caused meltdowns at the Fukushima plant.

Kansai Electric will today submit an application to halt its Ohi No. 3 reactor from Sept. 2 for regular checks, broadcaster NHK reported, without saying where it got the information. The utility plans to stop the Ohi No. 4 reactor for regular checks from Sept. 15, the broadcaster reported.

Japan’s Nuclear Regulation Authority began accepting applications on July 8 for the safety checks that must be completed before restarts can occur. The regulator said last week that reactors operated by Kyushu Electric Power Co. (9508), Shikoku Electric Power Co. (9507) and Hokkaido Electric Power Co. (9509) were eligible for inspections.

Applications

Hirose said the company wanted to apply as soon as possible for safety checks at Tokyo Electric’s Kashiwazaki-Kariwa plant in Niigata prefecture, 220 kilometers (137 miles) northwest of Tokyo. While acknowledging it may be difficult to persuade Niigata’s anti-nuclear governor, Hirose said the restart was necessary to make his company profitable again.

“Our priority is to meet the governor and win an understanding for a safety review application,” he said.

The following table shows the reported operating profits and operating losses of Japan’s nine nuclear plant operators for the three months ended June 30, 2013 and June 30, 2012, in addition to their forecasts for this financial year. Figures are in billions of yen.

                      1Q FY13     1Q FY12           FY Forecast
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Hokkaido Electric    -12.303     -14.719            Not provided
Tohoku Electric        4.592      -0.342            Not provided
Tokyo Electric       -23.490    -108.842            Not provided
Chubu Electric       -36.938      -1.361            -75.000
Hokuriku Electric      3.991      16.794            Not provided
Kansai Electric      -27.838    -140.518            Not provided
Chugoku Electric      -9.931      -9.316            Not provided
Shikoku Electric     -12.659     -19.801            Not provided
Kyushu Electric      -56.352     -94.353            Not provided
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Sources: Hokkaido Electric, Tohoku Electric, Tokyo Electric, Chubu Electric, Hokuriku Electric, Kansai Electric, Chugoku Electric, Shikoku Electric, Kyushu Electric.

To contact the reporters on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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