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TEPCO & cost-cutting

September 29, 2013



TEPCO head expects return to the black through cost cutting





The president of Tokyo Electric Power Co. predicted that the embattled utility can return to profitability for the current fiscal year by cutting costs even without restarting a third nuclear power plant or raising electricity rates.

Naomi Hirose told The Asahi Shimbun in Tokyo's Chiyoda Ward on Sept. 28 that expenses for fiscal 2013 can be reduced by delaying part of planned repairs of its power generation and transmission equipment to fiscal 2014.

The prospect for posting a profit for the fiscal year ending in March means that TEPCO will be eligible to secure new loans from financial institutions, including three megabanks.

Securing a pre-tax profit is a condition for TEPCO to be extended new financing.

The utility's business outlook improved with the possibility of bringing two reactors at the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture online in fiscal 2014.

TEPCO on Sept. 27 applied for checks of reactors No. 6 and No. 7 by the Nuclear Regulation Authority, which assesses if a nuclear facility meets the new safety standards before its reactors can be restarted. The move came after Niigata Governor Hirohiko Izumida finally gave consent to the company’s plan to proceed with the application after months of refusal.

“There is the possibility that we can resume operations during the next fiscal year,” Hirose said, referring to the two reactors at its Kashiwazaki-Kariwa plant.

TEPCO owns three nuclear power plants--the Fukushima No. 1 and No. 2 nuclear power plants in Fukushima Prefecture, both of which were damaged by the Great East Japan Earthquake and tsunami on March 11, 2011, and the Kashiwazaki-Kariwa plant on the Japan Sea coast. The latter has seven reactors.

Although the company sought to log a profit for the current fiscal year by delaying part of repairs of equipment to the next fiscal year, financial institutions were not sold on the plan.

They were concerned that the move to push back capital expenditures could imperil the financial standing of TEPCO in fiscal 2014.

However, with the possibility of the two reactors going back online in the next fiscal year, Hirose said the financial institutions’ concerns over the utility’s financial troubles eased.

TEPCO trimmed costs by 500 billion yen ($5.09 billion) for fiscal 2012 through reducing repair and personnel expenses.

“Additional cost cutting will help the company to return to profitability for the current fiscal year,” Hirose said.

After logging pre-tax losses in fiscal 2011 and 2012, the company also posted 29.4 billion yen in pre-tax losses for the first half of fiscal 2013.

The utility estimated that restarting a single reactor at the Kashiwazaki-Kariwa nuclear power plant will result in an increase of more than 100 billion yen in profits.

Hirose also said that the company will not consider a hike in electricity rates for the time being to increase earnings for the current fiscal year.

The rate hike was regarded as a key step to improving the company’s financial standing, along with bringing an idled reactor online. But the TEPCO president did not completely rule out the possibility of raising electricity rates.

He cited fluctuations in currency markets and crude oil prices as well as the safety checks, which could take longer than the expected six months or so.

(This article was written by Takashi Ebuchi and Mari Fujisaki.)

* * *

Excerpts of the interview follow:

Question: Why did it take TEPCO nearly three months after its board decided to actually apply to make a request for safety checks of the Kashiwazaki-Kariwa nuclear power plant (by the Nuclear Regulation Authority)?

Answer: The board made the decision on July 2, and three days later we visited the Niigata prefectural government to gain understanding for our decision. But our move was described as “abrupt” or “disregard for local governments.” After experiencing the Fukushima nuclear disaster, we made a fresh start as a new TEPCO. But due to the accident, we had to get involved with people in Fukushima Prefecture more than the residents of Niigata Prefecture. To the eyes of the people in Niigata Prefecture, it was like TEPCO came out of nowhere just to push ahead with our application for a safety clearance. We should reflect on our actions.

But applying for a safety screening led to more communications with local governments (in Niigata Prefecture). We began briefings in Kashiwazaki and Kariwa (the two municipalities that host the plant). The three months we had to wait until actually filing the application, I believe, was time needed to gain understanding to our position.

Q: Many people are critical of TEPCO for taking steps toward restarting the nuclear power plant despite the fact the accident at the Fukushima No. 1 nuclear power plant has not been resolved yet, as was manifested by continuing leaks of contaminated water.

A: I truly believe that we should apply for safety checks. We should put in place safeguard measures such as the construction of a breakwater to prepare for possible quake and tsunami. Safety checks are meant to determine that our precautions are appropriate and we are not being self-complacent, by an expert third party. We will need to overhaul safeguard measures in line with the conclusion (of the NRA).

Q: Still, applying for safety inspections is a process based on the premise of restarting a nuclear reactor.

A: Restarting a reactor is not something for the immediate future. I am not going to deny that it is a step leading to restarts, but we don’t know if the reactors can clear safety checks. Even if they can, it is not as if they will go online the next day. We cannot leave idled reactors as they are now. We want them to be examined for safety.

Q: TEPCO pledged to secure funding of 1 trillion yen over 10 years to deal with the contaminated water problem at the Fukushima No. 1 nuclear power plant. How are you going to make that happen amid your company’s financial difficulties?

A: We have yet to come up with specific steps to achieve it in 10 years' time. Admittedly, it will be difficult to secure that amount of money through regular cost-cutting efforts alone. We should whittle away investments as well. We will consider cutting back piecemeal the proportion of our investments in such projects as natural gas ventures overseas as well as rebuilding thermal power plants.

Q: The government decided to inject 47 billion yen in public funds to cope with the problem of radioactive water. But some critics pointed out that a line has not been drawn to clarify the responsibility between the government and TEPCO. What is your view?

A: There is room for discussion on such issues as the establishment of an entity to make it easier for public funds to be injected. But TEPCO is the one that actually carries out the task of dealing with contaminated water. Even if the responsibility now comes under the banner of the government and TEPCO, it does not instantly stop the flow of contaminated water and make everyone happy. We also face challenges such as the cleanup and compensation for people who were affected by the nuclear disaster. We are continuing to cope with such difficult tasks because of our determination to take responsibility for the accident we caused.

Q: In addition to compensation for victims, costs for cleanup and decommissioning the reactors are ballooning. Are you going to seek assistance from the government in this regard?

A: It is utterly impossible for us to pay those costs. Considering the liberalization of the electricity market, we will not be able to compete with huge debts on our shoulders. The issue will be the focus of our discussion to review the restructuring plan.





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