UPDATE 2-Second Japan nuclear operator seeks government bailout

Tue Apr 1, 2014 4:52am EDT

Related Topics

* Hokkaido Electric asks lender to buy shares for $490 mln

* Prolonged shutdown of reactors hurting finances

* Hokkaido Electric shares tumble more than 10 percent (Adds minister comment, price rises, new company comment)

By Taiga Uranaka

TOKYO, April 1 (Reuters) - Japan's Hokkaido Electric Power Co, facing a third year of financial losses, is seeking a capital infusion from a state-owned lender, a source with knowledge of the matter said on Tuesday.

If successful, Hokkaido Electric would be the second Japanese nuclear operator after Tokyo Electric Power Co (Tepco) to receive a government bailout since the Fukushima crisis in 2011. Japanese media earlier reported that the utility will get the bailout.

Hokkaido Electric is asking the government-owned Development Bank of Japan to buy 50 billion yen ($485.5 million) worth of preferred shares in the company, said the source, who was not authorised to discuss the matter publicly. The utility said in a filing that it has consulted with the Development Bank of Japan on how to procure funds, but has not formally requested a capital injection.

Japanese nuclear operators are in dire financial straits after being forced to import more costly thermal fuels amid a prolonged shutdown of their reactors for safety checks after an earthquake and tsunami hit the Fukushima Daiichi nuclear plant north of Tokyo in March 2011, causing the worst atomic crisis since Chernobyl in 1986. Tepco was bailed out by the government in 2012.

Most have raised already electricity prices, and further increases would be politically hard for the government to accept.

"I think it is extremely important for Hokkaido Electric to exhaust all possible avenues to avoid another rate hike," Industry Minister Toshimitsu Motegi told reporters during a regular press conference earlier on Tuesday.

Seeking an increase in capital would be one way to secure its finances, Motegi said, without further comment.

The utility said in February it was considering another increase in charges after raising prices last September, since higher revenue from the earlier hike and cost cuts are unlikely to prevent the utility from avoiding a more-than-110 billion yen recurring loss expected in the year ended March 31.

The company on March 27 said it applied for government permission to dip into special reserves that would reduce its net loss by 19 billion yen.

Liabilities may exceed assets in the financial year that started on Tuesday, the Nikkei business daily reported.

The company's shares tumbled more than 10 percent on Tuesday, compared with a 0.2 percent fall in the Nikkei 225 benchmark.

PRICE HIKES

Hokkaido Electric is the regional monopoly that supplies power to the country's northernmost island of the same name.

Six of nine regional monopolies that operate reactors in Japan have raised prices in the wake of Fukushima nuclear crisis, while one, Chubu Electric Power Co, has a request to lift rates under review, a spokesman at the industry's trade group said. Price increases for residential customers must be approved by the government.

All of Japan's 48 nuclear reactors are in shutdown and undergoing stringent safety checks with no schedule for restarts, forcing operators to import more costly fossil fuels.

The prolonged shutdown of Hokkaido Electric's sole Tomari nuclear plant and the cost of burning more fossil fuels has put it on course for a third straight financial year of net losses.

According to Japanese banking practices, it is very difficult for lenders to extend credit, including refinancing existing loans, to organizations that post three consecutive years of financial losses.

Hokkaido Electric is expected to negotiate the proposal with other shareholders and announce the plan by the end of April, with an official decision to be made at its annual shareholders meeting in June, the Nikkei reported.

($1 = 102.9850 Japanese Yen) (Additional reporting by James Topham, Osamu Tsukimori, Kentaro Hamada; Editing by Aaron Sheldrick, Michael Perry and Kenneth Maxwell)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.