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Business deals

Tepco will take 3% stake in Nippon Gas to deepen collaboration

Bundling city gas and electricity a key focus as domestic competition heats up

Nippon Gas boasts a vast sales network as a major provider of liquefied petroleum gas.

TOKYO -- Tokyo Electric Power Co. Holdings will acquire a 3% interest in Nippon Gas with hopes of increasing bundled sales of electricity and city gas in greater Tokyo amid escalating competition.

Tepco will purchase outstanding shares in the Tokyo-based seller of liquefied petroleum gas for about 6.5 billion yen ($61.1 million) through subsidiary Tepco Energy Partner. Tepco will dispatch an executive to the Nippon Gas board.

Nippon Gas retails electricity as an agent of Tepco under an ongoing business partnership. The current arrangement allows the gas company little freedom to customize service plans. After the share acquisition, Tepco will switch to wholesaling and let Nippon Gas offer its own service plans and charge customers for gas and electricity together.

Tepco is also hopeful that a stronger presence for Nippon Gas in the electricity market will boost sales of city gas sold in bundles. Nippon Gas procures all its city gas from Tepco through wholesaling.

Tepco faces intensifying competition, with Japan's retail markets having opened up for electricity in April 2016 and gas the following spring. Tokyo Gas has begun retail sales of power in greater Tokyo. Osaka Gas and Chubu Electric Power, which has traditionally served greater Nagoya, are setting up a joint venture to sell electricity around the capital.

The operator of the Fukushima Daiichi nuclear power plant must raise around 16 trillion yen over decades to cover costs related to the March 2011 meltdowns. As part of efforts to increase its earning potential, Tepco aims to lift sales from such newer businesses as city gas to 450 billion yen over three years.

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