Tepco's Second-Quarter Operating Profit Falls as Usage Drops

  • Revenue from electricity sales falls 7.9% on unit pricing
  • Drop in sales pressuring Tepco as nuclear restarts pursued

Tokyo Electric Power Co., operator of the wrecked Fukushima Dai-Ichi nuclear power plant, reported a 26 percent decline in second-quarter operating profit because of fuel-price adjustments and as its users consumed less energy.

Tepco, as the company is better known, posted an operating profit of 156.8 billion yen ($1.30 billion) for the three months ended Sept. 30, down from 212.6 billion yen a year ago, according to calculations based on first-half results released by the Tokyo-based company Thursday.

With Tepco strapped by Fukushima decommissioning costs and struggling to win approval to restart its remaining nuclear reactors, the drop in sales has squeezed the company’s profit. Revenue in the quarter dipped 11 percent to 1.58 trillion yen as competition increased amid a jump in new power producers and a drop in Japan’s economic output.

For the first half, Tepco’s revenue from electricity sales decreased 7.9 percent due to a drop in the unit price of electricity resulting from fuel cost adjustments, the company said.

Ahead of full liberalization of the retail power sector in April, new entrants have almost doubled their share of electricity output in the last three years and now account for about 5 percent of Japan’s supply.

Power Consumption

Japan’s power consumption dropped 2 percent in the quarter from a year earlier, the sixth straight quarterly decline, to 206.8 terawatt hours, according to data compiled by Bloomberg Intelligence. That’s the lowest use for that quarter since 2003.

Tepco is forecast to see a substantial decline in recurring profit next fiscal year due to power prices being automatically lowered by the nation’s price adjustment system, Yuji Nishiyama, an analyst at J.P. Morgan, wrote in a September note. The system adjusts monthly electricity rates for each utility based on a three-month average of import prices for LNG, crude oil and coal.

On a volume basis for the second quarter, Tepco’s electricity sales dropped 3 percent, the company said.

More than two-thirds of Tepco’s generated and purchased power comes from LNG, compared with 7 percent from oil and 17 percent from coal, according to a company fact book published in April. In August, the price of LNG imported into Japan dropped to $7.70 per million British thermal units, compared with $12.50 a year earlier.

Restarting Tepco’s Kashiwazaki-Kariwa No. 6 and No. 7 reactors in Niigata Prefecture would boost profit by as much as 28 billion yen a month, the company said earlier this month. The move faces local opposition. Hirohiko Izumida, the governor of the prefecture that’s home to the facility, said in August that the time isn’t right to consider whether the utility can restart it.

“Restarting Kashiwazaki-Kariwa would have an enormous impact, and would open a road for higher profits,” President Naomi Hirose told reporters in Tokyo on Thursday.

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