Tepco Leads Surge in Power Utilities After Nomura Upgrades

Tokyo Electric Power Co., Japan’s biggest power company by generating capacity, led a surge in utility shares after Nomura Holdings Inc. boosted its ratings on some of the nation’s utilities amid an expectation idled nuclear power plants will be restarted.

Tokyo Electric, which wasn’t mentioned in the Nomura report, rose 18 percent to 522 yen at the close on the Tokyo Stock Exchange, the highest since July 2011. Tokyo Electric, also known as Tepco, and three other Japanese companies were among the best performers on the 1,605-member MSCI World Index in Asian time. Tohoku Electric Power Co. rose 12 percent.

Tohoku Electric may return to profit and restore its dividend in the year ending in March, “ahead of other electric power companies that have applied for permission to hike electricity rates,” Shigeki Matsumoto, a Tokyo-based analyst at Nomura Securities Co., wrote in a report dated yesterday.

Japanese power companies reported combined losses of about 1.6 trillion yen ($15.8 billion) last fiscal year to cover rising fuel costs as almost all of the country’s reactors undergo checks and upgrades after the Fukushima disaster. The idled reactors will have to meet new safety standards, to be put into effect by July, before resuming operations.

Kyushu Electric Power Co.’s Sendai No. 1 and No. 2 reactors, which are candidates for the first restarts, may resume operations in January and February, respectively, Matsumoto wrote. Kansai Electric Power Co. may be able to restart No. 3 and No. 4 reactors at the Takahama nuclear plant as early as July 2014, he wrote.

Shares Gain

Matsumoto, who maintained his rating on Tohoku at neutral, raised his target price from 720 yen to 1,380 yen in the report. Ratings on Kansai Electric and Kyushu Electric were raised to neutral from reduce.

Tohoku Electric rose 145 yen to 1,338 yen, the highest since April 2011. Kansai Electric gained 13 percent to 1,417 yen, while Kyushu Electric climbed 6.3 percent to 1,464 yen.

The gains followed signs that lawmakers may be ready to take some of the pressure off Japan’s utilities, which are facing soaring fuel costs in the absence of the ability to generate electricity from nuclear power.

The government shouldn’t force Tepco, the operator of the crippled Fukushima nuclear plant, to take full responsibility for compensation and decommissioning and other Fukushima disaster issues, the Yomiuri newspaper quoted Prime Minister Shinzo Abe as saying yesterday in parliament.

Compensation Costs

The government will play a bigger role to fulfill its responsibility, Abe said, according to the Yomiuri.

The total cost of clean-up and compensation may exceed 10 trillion yen, twice the 5 trillion yen allocated by the government, Tepco said in November. Decommissioning the damaged reactors at the Fukushima Dai-Ichi plant may take more than 1 trillion yen, it said at the time.

“It’s a waste of time to project when and which reactors may restart at the earliest” because the regulator’s planned rules are still ambiguous, said Tomoko Murakami, a nuclear analyst at the Institute of Energy Economics Japan. “Nobody knows how long it will take for the regulator to complete their assessment on the safety of each reactor until they actually carry it out.”

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