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Business

Tepco to lay out turnaround path by 2019

New chairman wants to see the utility become a 'normal' company that 'earns money'

TOKYO --  Tokyo Electric Power Co. Holdings' new chairman is eager to turn the utility into "a normal company" that generates profit and gives back to society.

Chairman Takashi Kawamura, who took the position in late June, commented on the turnaround plan compiled in May in a recent interview. "One of the goals is to set a clear direction for a turnaround by 2019," said Kawamura. "We aim to create an organization with clearly defined responsibility and authorities."

Tepco's top shareholder, the government-backed Nuclear Damage Compensation and Decommissioning Facilitation, will evaluate the the utility around the end of fiscal 2019 to decide whether it is ready to be taken off government support.

The turnaround plan estimates the cost of decommissioning and damage compensation at around 22 trillion yen ($194 billion), and paying for those costs is premised on Tepco setting aside an average of 500 billion yen a year.

While skeptical Tepco alums have called the plan "absolutely unrealistic," Kawamura says it is a target that "could be achieved if we work really hard."

"We will let staff understand the importance of making money," he said. "A company pays taxes, interests, wages and dividends. To earn profit and give it back to society is the raison d'etre of a company."

Earning enough in open landscape

For Kawamura, who built his career at Hitachi, "making money" has become the mantra. He cited how the state-owned railway and Nippon Telegraph and Telephone became "normal companies" through reform and market liberalization.

Utilities in Japan had long dominated their local markets. With no competition, they had operated on what's known as the fully distributed cost pricing method, adding profit on top of total costs.

But in April 2016, the electricity retail market fully opened up. Tepco plans to lower in August rates for residential users in areas traditionally served by Chubu Electric Power. Tepco has signed a contract with a major plant of Mitsubishi Motors previously served by the Nagoya-area utility.

Citing the Hitachi turnaround efforts he led before, Kawamura said: "It took a long time to let staff understand that a company needs to make money." By 2020, when the electric power system reform runs its course, Tepco "must become a true private-sector company."

Tepco plans to consolidate its nuclear power and power distribution businesses with those of other companies, many of which are hesitant to step forward.

Nuclear push

Kawamura, who studied nuclear power in college, is a proponent of the technology. "Without nuclear power, Japan's economic value will gradually decline," he said. But simply having the government own nuclear plants does not solve the problem, he stated, calling for the need to develop the sector through free competition.

He cited the United Arab Emirates as an example of a major oil-producing country turning to nuclear energy. If nuclear power is fully abandoned and the country relies more heavily on gas-fired power, Japan's imports of liquefied natural gas would increase, eroding national wealth. "Uranium-employing power generation is the best," he said.

"I want Tepco to be able to make key decisions more quickly with initiative and a sense of responsibility," Kawamura noted. "We have yet to respond to requests from local communities, and we will do so one by one."

The local community of Fukushima Dai-ichi nuclear plant, which was devastated by the March 2011 earthquake and tsunami, is asking Tepco to dismantle the Fukushima Daini plant, which was not damaged the disaster. The company will also carefully assess the restart of the Kashiwazaki-Kariwa power plant in Niigata Prefecture.

(Nikkei)

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