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MarketScreener Homepage  >  Equities  >  Tokyo  >  The Kansai Electric Power Company, Incorporated    9503   JP3228600007

THE KANSAI ELECTRIC POWER COMPANY, INCOR

(9503)
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Anti-terror upgrades at reactors mean Japan LNG, coal demand to rise in 2020

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12/20/2019 | 05:52am EST
FILE PHOTO: Kyushu Electric Power's Sendai nuclear power station is seen from the shoreline in Satsumasendai

Japanese utilities face hundreds of millions of dollars in extra fuel costs in 2020 as they buy in extra liquefied natural gas (LNG) and coal while nearly half the country's working nuclear reactors go off-line for government-ordered security upgrades.

Analysts expect four of Japan's nine operating reactors to close temporarily next year while utilities make changes required under stricter anti-terrorism rules adopted after the 2011 Fukushima disaster.

Operators Kyushu Electric and Kansai Electric Power are among the utilities which have been mandated to build emergency off-site control rooms to serve as back-up bases that can keep nuclear reactors cooled and prevent meltdowns in the event of a terrorist attack.

Serving the southernmost of Japan's four main islands, Kyushu Electric has said its Sendai No. 1 reactor will be shut from March 16 to Dec. 26 next year, with No. 2 to be take off-line from May 20 to Jan. 26, 2021.

The utility has estimated the suspension of the two 890 megawatt (MW) units - the first plants to be restarted under stricter regulations after the 2011 disaster led to the shutdown of Japan's nuclear power industry - would boost its monthly costs by 8 billion yen ($74 million) as it purchases fossil fuels such as LNG and coal as alternative fuels for power production.

"We plan to utilise a newly built 1,000 MW Matsuura No.2 coal-fired power plant to replace nuclear power," a Kyushu executive told an earnings news conference in October. The precise mix of substitute fuels will depend on various factors including demand and fuel prices, he said.

ON DEADLINE

Japan's Nuclear Regulation Authority (NRA) has taken a strict line on enforcing deadlines by which the back-up anti-terror bases are to be constructed. It turned down a request from Kyushu Electric for a deadline extension earlier this year, leaving the utility with no option but to decide on temporary shutdown.

At Kansai Electric, serving Osaka, Kyoto and the surrounding industrial region, the deadlines for backup bases to be built at its Takahama No. 3 and No. 4 reactors are August and October 2020 respectively.

A Kansai spokesman said the company is making efforts to speed up construction. But analysts forecast the utility will be obliged to suspend operations at the reactors if it is to meet its deadlines.

Lucy Cullen, principal analyst at Wood Mackenzie, predicts Kansai will close the two Takahama reactors next year and expects a combination of coal, LNG and even oil could be used to offset the lost nuclear generation.

If both coal and gas-fired generation capacity are available, the choice of substitutes for nuclear ultimately depends on relative fuel economics, Cullen said.

"When contracted LNG volumes are available we would expect (utilities) to use LNG. However, if additional spot LNG cargoes are required, then coal is generally more economic," she said.

The impact next year could be enough to help reverse a declining trend for Japan's imports of LNG and thermal coal, falling since hitting peaks of 2014 and 2017 respectively with January-October numbers this year for LNG down 7% and coal off 3% year on year.

Cullen estimates Japan LNG imports will fall 5% in 2019 from last year to around 78 million tonnes, but expects LNG demand will recover slightly to 79 million tonnes in 2020, supported in part by closures of the four reactors.

What's more, while the four reactors at Sendai and Takahama are expected to be suspended, no new units are seen restarting in 2020, said Takeo Kikkawa, an energy studies professor at Tokyo University of Science.

"Japan's imports of LNG and coal may see an increase next year as operating nuclear reactors drop from 9 to 5 and without restart of any new reactors," he said.

(Graphic: Japan imports of coal and LNG - https://fingfx.thomsonreuters.com/gfx/ce/7/7839/7821/JapNEnergyImports.png)

(Reporting by Yuka Obayashi; Additional reporting by Aaron Sheldrick; Editing by Gavin Maguire and Kenneth Maxwell)

By Yuka Obayashi

Stocks mentioned in the article
ChangeLast1st jan.
HEWLETT PACKARD ENTERPRISE -4.25% 15.1 Delayed Quote.-4.79%
KYUSHU ELECTRIC POWER COMPANY, INCORPORATED 1.00% 905 End-of-day quote.-3.72%
LONDON BRENT OIL -1.13% 64.48 Delayed Quote.-2.06%
OBAYASHI CORPORATION 0.32% 1245 End-of-day quote.3.32%
THE KANSAI ELECTRIC POWER COMPANY, INCORPORATED 2.20% 1233.5 End-of-day quote.-1.36%
TOKYO ELECTRIC POWER COMPANY HOLDINGS, INCORPORATED 1.39% 438 End-of-day quote.-5.19%
WTI -1.02% 58.08 Delayed Quote.-4.50%
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Financials (JPY)
Sales 2020 3 226 B
EBIT 2020 216 B
Net income 2020 150 B
Debt 2020 3 905 B
Yield 2020 4,05%
P/E ratio 2020 7,33x
P/E ratio 2021 9,20x
EV / Sales2020 1,55x
EV / Sales2021 1,62x
Capitalization 1 102 B
Technical analysis trends THE KANSAI ELECTRIC POWER
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Income Statement Evolution
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Mean consensus HOLD
Number of Analysts 8
Average target price 1 381,25  JPY
Last Close Price 1 233,50  JPY
Spread / Highest target 17,6%
Spread / Average Target 12,0%
Spread / Lowest Target 2,15%
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NameTitle
Shigeki Iwane President & Representative Director
Makoto Yagi Chairman
Yoshihiro Doi Representative Director & Executive Vice President
Noriyuki Inoue Independent Outside Director
Takashi Morimoto Representative Director & Executive Vice President
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