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10 years after nationalization, Tepco still faces mounting challenges

Reactors 6 and 7 at the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture

July 31, 2022

Sunday marked the 10th anniversary since Tokyo Electric Power Company Holdings Inc. was effectively nationalized after the devastating triple-meltdown nuclear crisis at the Fukushima No. 1 power plant.

Tepco has struggled to rebuild its business while attempting to restore its reputation and compensate for its role in the disaster that immediately followed the Great East Japan Earthquake of March 11, 2011. However, more competition, a string of scandals and other problems have prevented the restart of its nuclear power plants — a key to rebuilding the company — resulting in sluggish performance.

Recently, the soaring cost of oil due to the Russia-Ukraine war has taken its toll, further exacerbating uncertainties in its restructuring roadmap.

In 2012, the Japanese government placed Tepco under its control by injecting about ¥1 trillion into the firm through the Nuclear Damage Liability Facilitation Fund to prevent the utility from bankruptcy and facilitate compensation efforts.

The total cost of the nuclear accident, which includes compensation, decommissioning and decontamination, is expected to be around ¥21.5 trillion ($161.3 billion), of which ¥15.9 trillion will be paid by Tepco.

Tepco, which shifted to a holding company structure in 2016 to improve management efficiency, announced a reconstruction plan in 2021 and aims to secure ¥500 billion annually for compensation and decommissioning costs. It also targets annual profits of around ¥450 billion after fiscal 2030.

But for fiscal 2021, the utility’s net profit plunged to ¥5.6 billion from ¥180.8 billion the previous year, as it saw a drop in electricity sales due to intensified competition and was hit by higher fuel costs from liquefied natural gas (LNG) and coal.

In September, the fuel cost adjustment system, which allows higher fuel costs to be added to rates, will reach its limit, putting further pressure on the company’s operations. Tepco has not disclosed its outlook for this fiscal year.

Its major hope is to restart reactors at the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture, as firing up one reactor is expected to improve earnings by about ¥50 billion. Yet the plant has been hit by a series of scandals, including inadequate anti-terrorism measures. The Nuclear Regulatory Authority, Japan’s nuclear watchdog, has issued a de facto ban on the plant’s operation.

Although Tomoaki Kobayakawa, Tepco president and CEO, claims that “we are working on nuclear reform with the restoration of trust from the community and society as our top priority,” restarting the plant will not be easy.

The stock price is also an obstacle to denationalization. The government hopes to cover the ¥4 trillion cost of decontamination efforts with the proceeds from the sale of Tepco shares. However, the closing share price on Friday was ¥523, far from the ¥1,500 needed to secure the cost.

As its attempt to reconstruct the firm has not proceeded as expected, Tecpo has repeatedly postponed its decision to denationalize.

A government official said that Tepco “was allowed to continue to exist by fulfilling its responsibility to Fukushima, in order to make steady progress in dealing with the accident.”

To steadily continue taking care of tasks related to the Fukushima nuclear disaster, Tepco will need to improve its business performance through strengthening its retail business by enhancing its services. The utility is also aiming to increase its corporate value by focusing on renewable energy.

https://www.japantimes.co.jp/news/2022/07/31/business/corporate-business/tepco-10-years-nationalized/

August 4, 2022 - Posted by | Japan | , ,

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