The Strategist

Tokyo Electric Power Co. restructuring plan gets a cold shoulder


03/23/2017 - 13:52



The latest reform plan for Tokyo Electric Power Co. Holdings is based on promising assumptions about willingness of colleagues to assist in restructuring and restarting production. However, it leaves doubts as to whether the energy company will be able to pay a large bill for cleaning up nuclear contamination.



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Tepco and a government-backed organization, which is the majority shareholder in the energy company, outlined updated plans for corporate restructuring on Wednesday.

The company is committed to a radical restructuring of operations, including integration of certain enterprises with other energy companies. Earlier Tepco refused to cooperate with any of the colleagues. However, such self-reliance can prevent bringing incomes back, warned the expert commission under the Ministry of Economy, Trade and Industry. 

Provision of funds for routine cleaning, connected with the crisis at the nuclear power plant "Fukushima" in March 2011, was the main reason for that the company's financial recovery plan has been updated for the first time in about three years.

Costs, such as damage to victims and decommissioning costs, are now estimated at 21.5 trillion yen ($ 193 billion) - twice the initial estimate. Tepco is required to cover losses by about 16 trillion yen, or about 500 billion yen per year during 30 years.

According to Seiichi Fubasami, executive director of Tepco, it would be very difficult to fulfill obligation to recover damages and still remain a competitive enterprise given the existing measures.

Resumption of operation of the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture is a key element of the plan, which allows increasing the company's annual revenue by more than 100 billion yen. However, it is unlikely that a restart will occur in the near future. This is explained by a number of errors during the security validation process.

Although Tepco hopes to work with other energy companies to win trust of the government and the public back, potential partners are suspicious of risks associated with working with Tepco, given its role in the disaster at the Fukushima nuclear power plant.

It is clear that the company is going to fully integrate fossil fuels operations with Chubu Electric Power. The combined business will be one of the world's leading buyers of fuel, and will provide about 50% of electricity in Japan, which will give both partners a significant competitive advantage.

However, according to Fubasami, Tepco's intentions to create a "forum for Japan's energy enterprises to talk about the problems they face" in the electricity distribution business received an icy welcome: some companies said they did not see any benefit from participation.

Meanwhile, the media reported that potentially fatal levels of radiation contamination were recorded on the territory of the Fukushima nuclear power plant.

The radiation detected by cameras and robots is contained in water in the protective shell of one of the reactors. It is known that infection is fixed at seven Sieverts per hour after six years of melting of the nuclear reactor core. In February, one of the robots recorded an infection of 650 Sievert per hour inside the reactor itself.

According to statistical data, if a human body receives a single irradiation of eight Sieverts at a time, the person will inevitably die soon.

source: asia.nikkei.com




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