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Tokyo Electric Power Company Holdings, Inc. has put off formulating its latest restructuring plan, which was expected in fiscal 2024. This is the result of the company being unable to clearly forecast its income and expenditures.
In order for TEPCO to fulfill its responsibility in the rebuilding of Fukushima, it is essential to create a plan to increase profitability.
The plan is needed to raise funds for compensation, decommissioning, decontamination work and other expenses following the accident at its Fukushima No. 1 nuclear power plant. A restructuring plan is also a prerequisite for TEPCO to receive support from the central government and banks. The firm has revised its plan every few years since 2012.
Of the ¥23.4 trillion to be spent dealing with the accident, TEPCO is supposed to be responsible for around ¥17 trillion, and there is a framework under which the company is paying out ¥500 billion each year.
TEPCO has released a tentative version of its restructuring plan that was created by revising the current plan, and it aims to draft an official plan within fiscal 2025.
The drafting of the new plan has been delayed because there is no prospect of restarting the nuclear reactors at TEPCO’s Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture, which is positioned as a central pillar of its restructuring.
However, TEPCO is also at fault here. As a spate of issues, including inadequate anti-terror measures, has come to light, local communities have grown more distrustful.
The company aims to restart a nuclear reactor at the Kashiwazaki-Kariwa plant this summer, and it expects that running a single reactor would improve its earnings by about ¥100 billion. TEPCO must do everything it can to regain the trust of the local communities and win their approval.
In order for TEPCO to make steady payments over the long term, it must not only work to restart nuclear reactors, but also strive to improve earnings.
The business environment surrounding TEPCO is severe. Due to the liberalization of electricity retailing, TEPCO has lost customers to new entries into the market, such as Tokyo Gas Co. and telecommunications companies. Its share of the market for ordinary households has fallen to about 70%.
At the same time, TEPCO is under pressure to expand investment to decarbonize, including through the use of renewable energy such as offshore wind power. It also bears a heavy responsibility for ensuring a stable supply of electricity to meet growing demand, which is due to the spread of artificial intelligence. And, efforts to strengthen the power grid must not be neglected.
Unless TEPCO improves its profitability, it will fall into a vicious cycle in which it lacks the funds for making the investments needed for growth.
To avoid this cycle, it is important to develop new businesses and increase earning power.
In 2019, TEPCO merged its thermal power generation division with that of Chubu Electric Power Co. to form a new company called JERA Co. However, with this one exception, it has achieved no notable results.
It is hoped that TEPCO will explore ways to collaborate with other companies, including those from different industries and other countries. It is also essential for the company to take further rationalization measures such as improving operational efficiency.
