Kyushu Electric Returns to Profit With Help of Nuclear

  • Annual net income totals 73.5 billion yen vs loss a year ago
  • Japanese utilities also benefitting from lower fuel costs

Kyushu Electric Power Co., the only Japanese utility with a nuclear power plant currently operating, returned to profit last fiscal year, underscoring the financial benefits from atomic generation to utilities facing challenges ranging from heightened competition to a slump in energy consumption.

Net income was 73.5 billion yen ($678 million) for the 12 months ended March 31, compared with a net loss of 114.7 billion yen a year ago, the Fukuoka-based company said in a statement Thursday. By operating the Sendai No. 1 and No. 2 nuclear reactors in southern Japan for about half the fiscal year, Kyushu Electric’s profit was boosted 73 billion yen, the utility said.

Japan’s utilities see nuclear generation as the best way to boost profitability, particularly as the former monopolies face declining sales, more competition from renewable energy and an influx of new retailers.

“Kyushu Electric has been able to offset this by restarting nuclear plants,” James Taverner, an analyst at IHS Inc., said by e-mail. “It has sharply cut fossil fuel consumption and reduced costly imports. Lower-cost generation has become even more important -- and a key competitive edge -- since the Japanese residential retail market was opened up.”

With the Sendai reactors back online, the company will pay a dividend of 5 yen per share for the year just ended, the first time it has been able to do that since the company shut its atomic plants following the March 2011 Fukushima nuclear disaster. Kyushu Electric, like Japan’s other utilities, is also benefiting from the sharp decline in fuel prices, a point highlighted by improving profits reported by Kansai Electric Power Co., Shikoku Electric Power Co. and Hokkaido Electric Power Co.

Full-year operating profit at Tokyo Electric Power Co. Holdings Inc. rose 18 percent to 372 billion yen, the company said Thursday.

Fuel Costs

With its nuclear reactors online, Kyushu Electric’s thermal power generation fell 24 percent in February from the previous year, compared with an average drop of 5.5 percent at Japan’s remaining 9 regional utilities, according to the latest data from the government.

In particular, Kyushu Electric was able to lower its use of oil-fired power plants, which are roughly three times more expensive to operate than a nuclear reactor, according to government figures. Kyushu Electric’s consumption of heavy oil and crude oil fell by 53 percent in February, while Tokyo Electric’s declined by 6.7 percent and Hokkaido Electric’s rose.

Brent crude oil fell about 27 percent over the last year to $47, while LNG imported to Japan dropped 63 percent to $6.8 per million British thermal units.

Still, power usage in Japan is declining amid a shrinking population and new entrants are cutting into electricity sold by the regional utilities. Japan’s population shrank the past seven years to 126.9 million, the smallest since 2000, according to estimates by the U.S. Census Bureau.

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. And with Japan fully liberalizing its electricity market on April 1, more retailers will be fighting for the stagnant market.

Market Liberalization

Since Japan opened its low-voltage market, representing about 40 percent of the nation’s consumption, about 744,400 households and small businesses have switched from the incumbent utilities to new providers, according to data compiled by the Organization for Cross-Regional Coordination of Transmission Operators.

Reflecting these trends, Kyushu Electric’s sales fell 2 percent to 1.84 trillion yen last fiscal year, while the drop was even bigger at Kansai Electric, the nation’s second-biggest utility, where revenue declined 4.7 percent. Sales at Tokyo Electric, the country’s biggest utility, fell 11 percent for the year.

Japanese utilities executives have made no secret about their desire to bring the nation’s nuclear fleet back online despite opposition from much of the public.

Nowhere is that argument more acute than at Tokyo Electric, the operator of the wrecked Fukushima Dai-Ichi plant. Should oil rise above $50, Tokyo Electric would swing to a net loss, the company’s president, Naomi Hirose, said in February, making the case for why the utility must restart its nuclear plants.

Tokyo Electric has applied to restart two units at its Kashiwazaki-Kariwa nuclear power plant northwest of Tokyo, spending hundreds of billions of yen to improve safety and meet new standards in the process. Resuming the two units would boost profit by as much as 28 billion yen a month, the company said last year.

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