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Friday, May 11, 2012
All rides on Kashiwazaki-Kariwa
Tepco survival plan depends on restarts
Tokyo Electric Power Co.'s special 10-year turnaround plan has been officially endorsed by the government, but industry observers are skeptical it will work.
The plan is for the beleaguered utility to get back into the black within two years, but that all depends on one crucial factor: restarting the reactors at the massive Kashiwazaki-Kariwa power plant in Niigata Prefecture.
"Without the prospect of restarting the Kashiwazaki reactors . . . the special plan will not be feasible," said Hirofumi Kawachi, a senior analyst at Mizuho Investors Securities Co. "Above all things, it comes down to that point."
The Kashiwazaki plant, the world's largest nuclear plant, has seven reactors.
According to the plan, approved Wednesday, Tepco will reduce spending by at least ¥3.36 trillion over 10 years by cutting 10 percent of its workforce and selling off assets, including its headquarters building in Tokyo.
To boost revenue and break out of its current money-losing structure, Tepco will also hike electricity prices by about 10 percent. This will mean an extra ¥480 per month for most households. The price hike must be approved by the trade minister, which will consider Tepco's request this week.
After Tepco's shareholders' meeting in June, the government will then nationalize the utility by acquiring enough shares to give it more than half of the voting rights in the company.
If everything goes as planned, Tepco will post a ¥201.4 billion net loss in fiscal 2012 but turn a ¥106.7 billion net profit in fiscal 2013 and stay in the black happily ever after.
But the restructuring plan hinges entirely on the assumption that Tepco will be able to restart the seven-reactor Kashiwazaki facility next April, allowing it to cut back on the soaring fossil fuel purchases necessitated by the Fukushima disaster. The switch to thermal power generation caused fuel costs to spike by ¥470 billion from March to December over the same period last year.
One Kashiwazaki-Kariwa reactor is worth ¥78 billion in fuel savings, according to Tepco.
Tokyo Electric President Toshio Nishizawa said the price hike is supposed to last for three years, but actually depends on whether it can restart the Kashiwazaki reactors.
Lawyer Kazuhiko Shimokobe, a key figure in Tepco's bailout fund who is scheduled to become Tepco's chairman in June, said Wednesday the timing for any restart at Kashiwazaki is up in the air, just like the turnaround plan.
"It's true that the plan would be a pie in the sky without the assumption the reactors will be restarted," Shimokobe said after the government signed off on it.
In reality, restarts are nowhere in sight. With all of the nation's 50 usable commercial reactors idled amid concerns about radioactive contamination of the food supply and future earthquakes, the tainted operator of the crippled Fukushima plant is likely to have a tough time convincing the public they're worth firing up again.
Niigata Gov. Hirohiko Izumida reportedly has no intention of meeting with incoming Tepco chief Naomi Hirose if Tepco is already intent on restarting the reactors.
An analyst who wished to remain anonymous said the cost of compensating the Fukushima radiation victims and decommissioning the four crippled reactors could rise at any time, putting even more pressure on the utility's operations.
Real gross domestic product could contract by 1.0 to 5.0 percent in 2030 if there is zero nuclear power generation that year but Japan's reliance on atomic energy remains the same as in 2010, new government estimates show.
If nuclear energy were to account for 15 percent of total power output in 2030 compared with 24 percent in 2010, increased electricity charges stemming from higher fuel costs would curb industrial activity and shrink GDP by 0.8 to 4.1 percent, according to the projections the industry ministry released Wednesday.
GDP would contract by 0.7 to 3.6 percent if atomic energy accounted for 20 percent of total energy output, by 0.7 to 3.5 percent if it represents 25 percent, and by 0.7 to 2.5 percent if it comes to 35 percent, the ministry said.
The estimates were calculated by five domestic think tanks on behalf of the ministry, which unveiled them at a subcommittee meeting of the Advisory Committee for Natural Resources and Energy, an advisory panel to industry minister Yukio Edano.