March 5, 2017 1:00 pm JST

Partner with Tepco? No thanks, say Japanese power peers

Fear of sharing the utility's nuclear cleanup costs spooks potential allies

TAKASHI NISHIOKA, TOMOHIRO EBUCHI and NAOKI ASANUMA, Nikkei staff writers

Niigata Gov. Ryuichi Yoneyama, center, inspects Tepco's closed Kashiwazaki-Kariwa nuclear plant on Feb. 1.

TOKYO -- Tokyo Electric Power Co. Holdings, operator of the crippled Fukushima Daiichi nuclear power plant, is sinking deeper into a quagmire.

With the sixth anniversary of the Fukushima disaster drawing near, Tepco is trying desperately to get back on its feet by resuming its nuclear power operations, possibly with the help of one or more partners. But potential candidates are distancing themselves from the ailing industry leader for fear of being forced to shoulder a debilitating financial burden.

Making things even worse for Tepco is the deepening financial crisis at Toshiba, whose huge losses have cast dark clouds over the future of Japan's nuclear power generation.

In limbo

All of Tepco's nuclear plants have been closed since the Great East Japan Earthquake, the collective name given to the massive earthquake and tsunami that slammed northeastern Japan on March 11, 2011.

Tepco is focusing on restarting its flagship Kashiwazaki-Kariwa nuclear plant, in Niigata Prefecture, to stay afloat. The seven-reactor facility is on the Sea of Japan coast and is now protected by a massive 10-meter-high storm surge barrier.

On Feb. 1, Niigata Gov. Ryuichi Yoneyama made his first tour of the plant since taking office last October. When he arrived, he was greeted by a nervous-looking Naomi Hirose, Tepco's president.

Tepco has been busy applying lessons it learned in Fukushima toward improving safety and training at the Niigata plant.

After his inspection tour, Yoneyama told reporters, "I was able to observe the safety measures (firsthand)." Tepco chief Hirose, this time looking relieved, said, "The governor is a person who attaches importance to dialogue (with us)."

Still, Yoneyama opted for a conservative approach. "As things stand now, I cannot accept a restart," he said. "It will still take several years to verify (the plant's safety)."

Nearly two weeks later, Tepco's efforts to bring the Kashiwazaki-Kariwa plant back online suffered a fresh setback, when it emerged that the facility's earthquake-readiness measures had been deemed inadequate.

On Feb. 28, the Nuclear Regulation Authority, Japan's nuclear watchdog, summoned Tepco President Hirose and called on the company to resubmit an application for safety checks at the Kashiwazaki-Kariwa plant's No. 6 and No. 7 units.

At the time, the NRA was in the final phase of safety examinations at the two reactors. The order from the watchdog dashed Tepco's hopes of getting the two reactors up and running quickly.

Bringing the Kashiwazaki-Kariwa plant back online is central to Tepco's turnaround efforts. The company estimates that firing up the two reactor units will improve its balance sheet by 100 billion yen ($881 million) a year.

Tepco claims it has pared costs to the bone and needs to restart the Niigata plant if it is to get the funds needed to fix its lingering problems in Fukushima.

Keeping their distance

On Oct. 25 last year, the Ministry of Economy, Trade and Industry, which oversees the electric power industry, put forward the idea of spinning off Tepco's nuclear business into a separate company. 

METI included the idea in materials prepared for a ministry panel tasked with crafting reform plans for Tepco. Fully aware of how difficult it is for the company to resume nuclear operations on its own, the ministry wanted to gauge the reaction of other power companies.

The response from the industry was strong and immediate.

"We do not have an alliance or a realignment in mind at all," said a clearly riled Hiroya Harada, president of Tohoku Electric Power, when asked about the idea.

Tohoku Electric Power is based in the northeastern city of Sendai, Miyagi Prefecture, and its service area includes the Kashiwazaki-Kariwa nuclear plant.

Harada said building trust with the communities that host nuclear plants is crucial. "It is impossible for a different player to suddenly step forward" and operate the Kashiwazaki-Kariwa plant with Tepco.

Nagoya-based Chubu Electric Power partners with Tepco on thermal power, but it has no interest in extending the alliance to nuclear energy.

"I cannot understand what benefits it would bring us," said Chubu Electric Power President Satoru Katsuno.

Last year, Osaka-based Kansai Electric Power Co. formed a broad nuclear partnership in western Japan with three other electric utilities: Kyushu Electric Power, Chugoku Electric Power and Shikoku Electric Power.

It is clear that Tepco's domestic peers are alarmed by the possibility of being forced to share the huge financial costs of dealing with the Fukushima disaster.

In December, the METI panel compiled a report containing recommendations for Tepco reforms. Though it refrained from using the term "spinoff," the report called for reorganizing and integrating Tepco's troubled nuclear power business with that of one or more partners by "establishing a joint venture."

Tepco is keen on the idea, with Hirose saying after the report was published, "We want to proceed with the realignment with other companies." However, no other company wants to raise its hand.

METI estimates that the cleanup and other efforts at Fukushima will cost 21.5 trillion yen. Tepco has already committed to paying 15.9 trillion yen for decommissioning work, compensation for the victims and other expenses. So far, it has coughed up about 1.2 trillion yen and will have to pay 500 billion yen a year for the next 30 years.

The central government became Tepco's top shareholder after the disaster, and the utility is expected to remain under state control for the foreseeable future.

The Toshiba effect

The financial chaos at Toshiba comes at a bad time for Tepco, as it could spell trouble for the entire domestic nuclear industry.

Toshiba is one of Japan's three nuclear plant manufacturers, along with Mitsubishi Heavy Industries and Hitachi. Its massive loss of over 700 billion yen stemming from its U.S. nuclear subsidiary, Westinghouse Electric, has Toshiba moving to scale back its nuclear operations, especially abroad. Japanese electric power companies fear that such moves could affect their plans to restart and decommission nuclear reactors.

Yoshimitsu Kobayashi, chairman of major business lobby the Japan Association of Corporate Executives, said consolidation is needed in the nuclear power industry. "We must think about whether (the nuclear power business) can be done by one company alone," he said.

In addition to chairing Keizai Doyukai, as the lobby is known in Japanese, Kobayashi serves as an outside board member at Toshiba.

Keeping the nation's nuclear plants offline will not only mean continued higher energy bills, it will also inevitably lead to a tapering off of Japan's nuclear technologies and skilled nuclear personnel.

Preventing such a scenario will almost certainly require industry consolidation. At this time, however, no such moves are on the horizon. In the meantime, the nation is still grappling with the effects of the Fukushima disaster, and consumers and businesses continue to feel the squeeze.

 

 

Tokyo Electric Power Co. Holdings, Inc.

Japan

Market(Ticker): TKS(9501)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 6,660.37M
Shares: 1,607.01M

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,708.65M
Shares: 4,237.60M

Tohoku Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9506)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 6,947.41M
Shares: 502.88M

Chubu Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9502)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 10,014.19M
Shares: 758M

Kyushu Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9508)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 5,691.94M
Shares: 474.18M

The Chugoku Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9504)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 4,236.75M
Shares: 371.05M

Shikoku Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9507)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 2,816.64M
Shares: 223.08M

Mitsubishi Heavy Industries, Ltd.

Japan

Market(Ticker): TKS(7011)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 12,880.35M
Shares: 3,373.64M

Hitachi Ltd.

Japan

Market(Ticker): TKS(6501)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 31,915.00M
Shares: 4,833.46M

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