Some Japanese utilities cut profit outlook as energy costs spike

Okinawa Electric Power

02/11/2021 07:31

By Yuka Obayashi
    TOKYO, Nov 2 (Reuters) - Surging energy costs have forced
some Japanese utilities to slash their annual earnings
forecasts, but they say they have prepared for the peak winter
season with adequate fuel stocks and early plant maintenance to
avoid unexpected shutdowns.
    Seven of 10 major regional electric utilities lowered their
guidance last week, with Tokyo Electric Power  9501.T  and
Chugoku Electric Power  9504.T  forecasting net losses, against
earlier predictions of net profits.
    The utilities blamed the weaker outlook on higher coal and
liquefied natural gas (LNG) prices.
    Thermal coal prices  NCFMc1  have more than doubled between
March 31 and Sept. 30 while LNG spot prices  LNG-AS  have nearly
quadrupled, with Brent crude  LCOc1  rising more than 20% as the
global economy rebounded from the pandemic-induced slump amid
tight supplies.
    Japanese utilities are still heavily reliant on coal and LNG
in their fuel mix despite growing pressure to shift away from
fossil fuels to tackle climate change and as they struggle to
restart nuclear power stations due to stricter regulations after
the Fukushima nuclear disaster in 2011 and local opposition.
    "A relatively high proportion of coal in our power mix is a
reason for a sharp downgrade in full-year estimate," said
Nobuyasu Tokuda, earnings group manager at Chugoku Electric.    
     
    Chubu Electric Power  9502.T , Shikoku Electric Power
 9507.T  and Hokkaido Electric Power  9509.T  slashed their
profit forecasts by more than 50% while Hokuriku Electric Power
 9505.T  and Okinawa Electric Power  9511.T  trimmed their
outlook by 40% and 11%, respectively.
    Meanwhile, Kansai Electric Power  9503.T  and Kyushu
Electric Power  9508.T  kept their forecasts unchanged as they
were able to offset the effects of higher fuel costs via the
operation of a few nuclear power plants.  JAPAN/O 
    Tohoku Electric Power  9506.T  also kept its guidance saying
it had effectively diversified procurement methods, including
varying the timing of decision making and pricing indexes.
    Although the impact of higher fuel costs can be mitigated
under the country's fuel cost adjustment system, which lets
utilities pass on the costs to consumers, there is a time lag of
three to five months which will impact bottom lines.
    Utilities are getting ready for another winter of tight
electricity supply, following a power crisis last winter when
cold weather sent Japanese electricity prices to records.
    "For this winter, we are cutting procurement of spot LNG
cargoes and using short-term contracts instead to ensure both
economic efficiency and stable fuel supplies," Hideaki Sasaki,
executive officer at Tohoku Electric, said.
    JERA, a fuel and thermal power joint venture of Tokyo
Electric and Chubu Electric, is reinforcing maintenance of power
plants ahead of winter to provide stable power supply, Hideo
Nakanishi, Chubu's executive officer, said.  urn:newsml:reuters.com:*:nL1N2RS0NB
    
Following is a table of net profit estimates by Japan's major
electric utilities for the year to March 2022.
Figures are in billion yen:
                      Latest     Previous        % change
                    Estimate     Estimate  
 Hokkaido Elec             9           20           -55.0
 Tohoku Elec              23           23           　  --
 Tokyo Elec              -16           67                
 Chubu Elec               25           75           -66.7
 Hokuriku Elec             3            5           -40.0
 Kansai Elec              70           70              --
 Chugoku Elec            -14            8                
 Shikoku Elec            4.5           13           -65.4
 Kyushu Elec              45           45              --
 Okinawa Elec            4.2          4.7           -10.6
    

 (Editing by Jacqueline Wong)
 ((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))