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Bailout requests colour Japan’s nuclear debate

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03.04.2014

Financial Times

Renewed signs of the post-Fukushima strain on Japanese utilities’ finances emerged on Wednesday as Kyushu Electric Power said it was in discussions with a government-owned bank over a possible capital infusion.

The acknowledgment came a day after news that another utility, Hokkaido Electric Power, was seeking a Y50bn ($484m) bailout from the same lender, the Development Bank of Japan.

Demands for financial support from the groups could colour the debate over whether to restart some of the 50 nuclear reactors in Japan that have been idled over safety concerns since the accident at Fukushima Daiichi power station in 2011.

Utilities including Kyushu Electric and Hokkaido Electric have applied for approval to restart about a dozen reactors, and government safety regulators are preparing to deliver their first rulings as early as May. But distrust of nuclear power remains widespread, making the issue a politically sensitive one.

 

In surveys, a little more than half of respondents say they want the nuclear industry shut down completely, either right away or in stages. Yet that preference was not strong enough to stop voters in 2012 from electing the pro-nuclear Shinzo Abe as prime minister. His support for restarting plants is connected to a pledge to boost economic growth.

Mr Abe has reversed the previous administration’s decision to shut all of Japan’s atomic power plants over the next three decades, with a new energy plan released in February that calls atomic power an “important baseload electricity source”.

Japan relied on nuclear plants for 30 per cent of its electricity before Fukushima, and the mass shutdown has inevitably put pressure on power companies. Their collective generating costs have increased more than Y3tn a year since the accident, according to government estimates, as they are forced to buy more natural gas, coal and oil to make up for the loss of atomic power.

Utilities have already raised electricity charges in response. Now, they are in effect offering a choice between more price increases, government aid or the return of a large number of nuclear plants to service.

Kyushu’s net debt of Y2.54tn is equal to 28 times its estimated earnings before interest, tax, depreciation and amortisation last year, the second highest multiple among Japan’s 10 regional utilities after Hokkaido. It has not been in profit since April 2011 and recorded a net loss of Y59bn in the nine months to December 31.

Shares in Kyushu closed down 4.95 per cent at Y1,151.

Hokkaido Electric, based on Japan’s northernmost island, estimates that it suffered a Y60bn net loss in the fiscal year through to the end of March, its third year in the red following the tsunami-induced meltdowns at the Fukushima Daiichi plant.

Two years ago the government was forced to step in with a Y1tn recapitalisation of Tokyo Electric Power, the Fukushima plant’s owner. It has also helped other utilities more indirectly by helping to secure emergency loans. Kansei Electric, which serves Osaka and other cities in western Japan, had sought and received a Y45bn loan from the DBJ, which was issued on Monday.