Japan power companies investment plans, fuel purchases -survey

Fri Nov 9, 2012 4:37am EST

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By Yuko Inoue and Risa Maeda
    TOKYO, Nov 9 (Reuters) - Japan's power companies plan to add about 18 gigawatts of gas-fired electricity plants in the next ten years,
a capacity increase of 30 percent, a Reuters survey showed.
    Some plants will replace older ones, with liquefied natural gas being the most preferred of the fossil fuels. The companies also plan
to add about 5 GW of coal-fired plants over the same period, boosting the capacity of these from 39.6 GW in March 2012.
    Last week's survey of Japan's regional and wholesale power suppliers around the time of earnings announcements also shows they are more
inclined to use lower grades of Indonesian coal, known as sub-bituminous, and plan to step up efforts to delink LNG prices from oil.
    But with Japan's stated policy of ending nuclear energy now in limbo, the most common note sounded in their responses is an inability
to set new fuel procurement plans or review station construction plans as they face a second business year with all, or most, of their
nuclear facilities idled.
    Japan shut down its reactors as a safety measure after its worst nuclear disaster in 25 years, triggered by the devastating earthquake
and tsunami of March 2011 that caused three reactor meltdowns at Tokyo Electric Power Co's Fukushima Daiichi station.
    The catastrophe forced 160,000 people flee from their homes and prompted the government to adopt a policy that aims to end reliance on
nuclear power and open up competition.
    But when the government agreed a new energy policy in September, it rolled back an earlier commitment to abandon nuclear energy by the
2030s. 
    All but two of Japan's 50 nuclear plants are idled as they go through safety upgrades that may not be finalized before next summer as a
new regulator formulates fresh operation standards. Japan's nuclear capacity amounts to 46 GW.
    The questions in the survey focused on fuel use and procurement plans by type for the years through March 2013 and March 2014,
purchasing strategies and new station investment plans.

    
   
    Tokyo Electric, or Tepco, on Wednesday announced it was considering building a coal-fired power plant in Fukushima to help rebuild
disaster-hit areas. 
    It also announced plans for auctions to contract out construction of 10 GW of total capacity of new fossil-fuel fired power generation
units, to phase out ageing power plants. 
    Reuters surveyed Tepco, Chubu Electric Power Co, Kansai Electric Power Co, Chugoku Electric Power Co,
Hokuriku Electric Power Co, Tohoku Electric Power Co, Shikoku Electric Power Co, Kyushu Electric Power Co
, Hokkaido Electric Power Co, Okinawa Electric Power Co, the only regional utility that doesn't have nuclear
capacity, and Electric Power Development Co, the nation's main electricity wholesaler, which is also known as J-Power.
    Eight of the regional monopolies had combined losses of 674 billion yen ($8.44 billion) for the six months to Sept. 30 as they spent
more on fossil fuels to make up for idled nuclear capacity, earnings statements showed. Okinawa Electric, Hokuriku Electric and J-Power
reported profits.   
    
Survey highlights   
 Company     Fuel Use Plans            Comments on coal use     Comments on LNG use
 Tepco       No comment on plans for   Has used sub-bituminous  Buys 60 pct of long-term LNG
             2013/14 LNG spot          and plans to increase    contracts jointly with other
             purchases but will tap    use.                     utilities. Spot LNG purchase made
             spot markets.                                      up 25.9 pct of total LNG buys in 
                                                                April to September period. Will 
                                                                contract out construction of new
                                                                fuel plants. More than 18 GW of
                                                                capacity supplied by oil and LNG
                                                                plants older than 30 yrs. 
 Kansai      No comment                To cut fuel cost, has    Turned to Russia, Africa and 
                                       bought LNG on spot       Australia to diversify away from 
                                       basis and U.S. coal on   traditional South East Asian crude
                                       trial basis.             suppliers. Has tied up long-term
                                                                LNG contracts using European- 
                                                                and U.S.-gas linked pricing,
                                                                and aims to step up such contracts.
 Chubu       No comment, as nuclear    Has used sub-bituminous  Signed contract in July to build U.S.
             plant restarts            coal by up to 20         LNG plant with Osaka Gas, aims to
             uncertain.                percent and plans to     change the structure of Asia's LNG
                                       increase use.            market by bringing in U.S . 
                                                                gas-linked LNG. 
 Hokkaido    No comment, as nuclear    No concrete plan         Diversifying fuels and introducing
             plants restart                                     LNG combined cycle plants to secure
             uncertain.                                         future power supply. Three LNG
                                                                plants with total capacity of 1,600
                                                                MW to start operations in 2019-2028. 
 Shikoku     No comment as nuclear     No comment               Will consider new power station
             plants restart                                     plans after Japan's energy policy
             uncertain.                                         becomes clearer.
 Chugoku     No comment, as nuclear    Decision to use          Aims to diversify supply sources,
             plant restart uncertain.  sub-bituminous coal      boost facilities for large-sized
                                       will depend on prices    LNG carriers and non-conventional
                                       and plant capability.    natural gas to cut costs. 
 Okinawa     No comment on 2013/14     Expects sub-bituminous   No plans to push to delink LNG 
             fuel plan.                coal to make up 60       pricing.
                                       percent of total coal    
                                       use in 2012/13.          
 Tohoku      No comment on 2013/14     Has used sub-bituminous  Buys 40 pct of LNG on spot basis in
             fuel plan as nuclear      coal and aims to step    2011/12. 
             plants restart            up its use.              
             uncertain.                                         
 Kyushu      No comment on 2013/14     Introduced               No comment on pricing link. 
             fuel plan.                sub-bituminous coal      
                                       since 2004/05, will      
                                       step up use of lower     
                                       grade coal to cut        
                                       costs.                   
 ($1=79.83 Japanese yen)

 (Additional reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and)
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