Sales Issue of TEPCO EP

2020 is expected to be the year when TEPCO Energy Partner (TEPCO EP)’s management issues will begin to take off.

Within the TEPCO Group, the current account loss of TEPCO EP in fiscal 2020 is expected to be huge, and it is expected that even greater losses will occur in fiscal 2021 and beyond. President Nobuhide Akimoto has reported this situation to TEPCO Holdings (TEPCO HD), but TEPCO HD has determined that this situation is “absence of management,” and the gap between the them is only deepening.

Why did this happen?

The trend of fixed power costs greatly affects the balance of TEPCO EP. After 3.11, the company was forced by the Ministry of Economy, Trade and Industry(METI) to procure IGCC as a Fukushima reconstruction power supply, recruit IPP power, and continue to purchase JERA power. Due to the full-scale being equipped, payment of fixed costs will increase significantly. In the future, JERA’s Yokosuka thermal power plant and other new power sources are scheduled to start operation, and the purchase price is expected to increase.

As is well known, METI appealed to politicians and set up a new power source for the establishment of JERA after 3.11 amid sluggish power demand. TEPCO EP is being forced to buy it. In addition, since FY2015, they have destroyed the price of his own electricity. The current TEPCO EP bears all of these tips.

Due to a loan agreement with a financial institution, the TEPCO Group cannot leave this out.

For the time being, in the 2020 fiscal year, it seems that there is no appropriate measure other than overcoming the balance within the group by taking over the basic fees of Kashiwazaki-Kariwa Nuclear Power and Nuclear Power Generation Tokai Daini which are paid by TEPCO EP.

However, as a drastic measure, METI is considering selling TEPCO EP.

The buyers can be JXTG, Osaka Gas, Chubu Electric Power, JERA, NTT Group, Softbank Group, etc. In any case, the focus will be on whether to inherit the power purchase agreement currently held by TEPCO EP. There is no doubt that. No one can accept a contract to purchase a non-operational nuclear power plant of both TEPCO & Nippon Nuclear Power. However, if these contracts are exempted from the inheritance, the sale of the TEPCO EP would be a useless activity in the first place.

Despite the difficult decision, the METI will still execute the “sale”. Because “Restructuring” and “integration” are the best ways for bureaucrats to promote their work and appeal to politicians.

In FY2020, the following “Comprehensive Special Business Plan of TEPCO” will be announced. It is also a delicate period when the price of fixed power supply is determined in the market as capacity market trading starts. Under these conditions, stakeholders are silently watching what kind of decision the bureaucrats & buyer would take for TEPCO EP, and who would bear the excess power supply fixed costs as a result. We are also watching it.