Japan Props Up More Power Utilities to Avoid Rate Increases

Photographer: Tomohiro Ohsumi/Bloomberg

A man walks in front of Hokkaido Electric Power Co.'s Tomari nuclear power plant in Tomari Village, Hokkaido, Japan. Hokkaido Electric also applied in July for the restart of three units at its Tomari atomic plant. Close

A man walks in front of Hokkaido Electric Power Co.'s Tomari nuclear power plant in... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

A man walks in front of Hokkaido Electric Power Co.'s Tomari nuclear power plant in Tomari Village, Hokkaido, Japan. Hokkaido Electric also applied in July for the restart of three units at its Tomari atomic plant.

Japan moved to prop up another two unprofitable power companies after they posted losses of 159 billion yen ($1.6 billion), underscoring how the idling of atomic reactors is forcing losses on most of the nation’s utilities.

Kyushu Electric Power Co. (9508) and Hokkaido Electric Power Co. (9509) will receive a combined 150 billion yen from a state-owned Japanese bank, joining Tokyo Electric Power Co., operator of the wrecked Fukushima plant, on the list of utilities to secure government aid.

The investment comes as the government seeks to forestall electricity rate increases by utilities that could hinder the country’s fragile economic recovery. The investment from the Development Bank of Japan Inc. would help the utilities offset fossil fuel costs that have soared since the 2011 accident at the Fukushima Dai-Ichi nuclear plant idled their atomic plants.

“They’re getting closer to a break-even scenario even without nuclear power,” said Tom O’Sullivan, founder of Tokyo-based energy consultant Mathyos.

Rate Increases

Hokkaido Electric led utilities higher today, rising 13 percent to 707 yen, the biggest one-day gain since April 12, 2013. Kyushu Electric gained 94 yen, or 9 percent, to 1,125 yen, the most since May 29, 2013.

The Topix Electric Power & Gas index rose 3.3 percent, the most since Feb. 21.

O’Sullivan cautioned that nuclear-plant restarts or rate increases could be necessary to sustain such gains.

“The fundamentals have not changed and there are still considerable uncertainties,” he said.

Jun Ueda, head of Hokkaido Electric’s Tokyo branch, said yesterday that it may need a rate increase if it sees no prospect for the restart of its Tomari nuclear plant by summer.

Hokkaido Electric is among the utilities that have already raised power prices since April 2012 to offset fuel costs, according to data compiled by the Japan Atomic Industrial Forum Inc. The others are Tokyo Electric, Kansai Electric Power Co., Tohoku Electric Power Co., Shikoku Electric Power Co. and Kyushu Electric.

Reactor Restarts

Hokkaido Electric, which serves 4 million customers on Japan’s northernmost main island, announced an annual net loss of 63 billion yen yesterday, when it said it would receive a 50 billion yen preferred stock investment from the Development Bank of Japan.

Kyushu Electric, which had an annual net loss of 96.1 billion yen, said it will take an investment of 100 billion yen from the state-backed bank. That utility serves 8.5 million customers on the southernmost of Japan’s four main islands.

Kyushu Electric applied in July for restarts of two reactors at its Sendai plant and two reactors at its Genkai plant. Japan’s Nuclear Regulation Authority said in March that it would prioritize safety checks needed for restarts at the two Sendai reactors.

Payout Fund

Even so, Kyushu Electric may not be able to resume operations until the summer or later, Hiroshi Tamura, a strategist and chief fund manager at Fukoku Capital Management Inc., said in an interview.

Hokkaido Electric also applied in July for the restart of three units at its Tomari atomic plant. It could require months of construction before they meet tougher safety standards, Kyodo News reported on Feb. 4, citing Japan’s Nuclear Regulation Authority.

Tokyo Electric, Japan’s biggest utility, returned to profit in the year ended March 31 after raising electricity rates and putting off repair work at some of its plants.

Operating profit was 191.4 billion yen in the 12 months ended March 31, compared with an operating loss of 222 billion yen a year earlier, according to a statement from the wrecked Fukushima plant’s operator.

The return to profit was led by increased revenues after the utility, which serves 29 million customers in the Tokyo metropolitan area, raised electricity rates for households in September 2012. The increase boosted electricity sales by 10 percent to 5.9 trillion yen for the year.

Net income was 438.6 billion yen after a government injection into the utility’s fund for payouts to people and companies affected by the Fukushima disaster.

The company paid 2.9 trillion yen for fuel last fiscal year, about 3.5 percent higher than the previous year’s 2.8 trillion yen.

It closed at 401 yen after rising as much as 4.7 percent, its most since Feb. 7.

The following table shows the reported net loss or net income at Japan’s nine nuclear plant operators for the year ended March 31, 2013 and their forecasts for the year ending March 31, 2014. Figures are in billions of yen.

COMPANY                 FY EARNINGS               FORECAST
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Tokyo Electric         438.647                    Not provided
Chubu Electric         -65.327                    12.000
Kansai Electric        -97.408                    Not provided
Chugoku Electric        -9.384                    Not provided
Hokuriku Electric        2.516                    Not provided
Tohoku Electric         34.303                    Not provided
Shikoku Electric        -3.289                    Not provided
Kyushu Electric        -96.096                    Not provided
Hokkaido Electric      -62.972                    Not provided

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Sources: Tokyo Electric, Chubu Electric, Kansai Electric, Chugoku Electric, Hokuriku Electric, Tohoku Electric, Shikoku Electric, Kyushu Electric, Hokkaido Electric

To contact the reporters on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net; Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Iain Wilson, Keith Gosman

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