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Tepco will reorganize to keep up with deregulation: chairman

TOKYO -- Tokyo Electric Power Co. and other Japanese power utilities must reshuffle operations as the industry enters the era of full competition, Chairman Fumio Sudo told The Nikkei recently.

     Sudo offered his assessment of the future for his company and industry after retail power sales are fully deregulated next spring.

     Excerpts from the interview follow.

Fumio Sudo

Q: What is your take on the industry's business climate?

A: Although the government projects that [electricity] demand will grow slightly toward 2030, a decline is also possible. With regional monopolies ending with full deregulation in April 2016, power companies should change the vector of their management. Tepco needs to shore up competitiveness in order to pay out compensation for the Fukushima Daiichi nuclear disaster.

     Domestic electricity rates are higher than in other industrialized nations, with industrial rates 2.5 to three times those in the U.S. and South Korea. With an agreement over the Trans-Pacific Partnership, competition in trade and investment will intensify. To ensure that Japanese industry doesn't lose to foreign players, I strongly feel that we need to contribute by lowering electricity rates.

Q: What will Tepco do?

A: We will press ahead with business reorganization. Tepco was the second-ranked power company in the world by sales in 2000 but has since fallen to eighth in 2014. European players have aggressively engaged in M&As, widening the gap. We cannot miss out on the wave of business reorganization.

     First, we will bring on track our 50-50 joint venture established with Chubu Electric Power in April. Such operations as fuel transportation will be integrated in October, with others integrated later on, including fuel procurement and overseas power generation. Things have gotten off to a good start, and there is no wavering on [the planned] integration of existing thermal power generation businesses [for which a decision is expected in the spring of 2017].

     Tepco will separate its fuel and thermal power generation, power transmission, and retail businesses next April, with these businesses to come under a holding company. This will make it easier for each to form partnerships.

Q: The decommissioning of old nuclear reactors will require time and money.

A: We can learn from France, where EDF is playing a central role. The country has created a system for securing specialized personnel and technologies under a medium- to long-term plan, spending decades on decommissioning reactors and promoting research on waste disposal. Japan also needs to adopt a framework that brings together power utilities and manufacturers of nuclear reactors.

(Nikkei)

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