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UPDATE 1-Japan's Tepco may hive off hydro, renewable energy operations-sources
August 12, 2014 / 8:41 AM / 3 years ago

UPDATE 1-Japan's Tepco may hive off hydro, renewable energy operations-sources

(Adds details about debt structure)

TOKYO, Aug 12 (Reuters) - Tokyo Electric Power Co may hive off its hydropower and renewable energy operations into a separate unit, people with knowledge of the matter said, in another element to a revamp as it tries to recover from the Fukushima nuclear disaster of 2011.

Tepco, as the utility is called, has drafted successive recovery plans to restore its finances after the worst nuclear disaster since Chernobyl in 1986, which led to its takeover by the government.

A plan agreed by the government in January hinges on Tepco restarting its Kashiwazaki Kariwa nuclear plant to cut fossil fuel costs, a contentious undertaking staunchly opposed by the local governor.

With no units at the Kashiwazaki Kariwa plant likely to be rebooted soon and with Japan undertaking reforms to fully liberalise the electricity industry, the company needs to consider further measures, said one of the sources, who is not authorized to speak to the media.

The company had already planned to split into three units under a holding company, covering power generation, electricity transmission and distribution, and retail sales.

Executives are also working out how to divide Tepco’s assets among the holding company and subsidiaries, said another source.

The holding company is expected to have about 22 percent of Tepco’s assets, including its nuclear facilities, the transmission company 57 percent, the power generation unit 14 percent and the hydropower renewable energy unit 7 percent, the person said. The retail subsidiary will hold about 0.1 percent of Tepco’s assets.

The estimated 6.6 trillion yen ($64.5 billion) of debt that Tepco is expected to have on its books by the end of March 2016 will be divided up in the same way, the person added.

The debt will be guaranteed by each unit’s assets.

Projected annual revenues for the power generation section were put at more than 2 trillion yen, the grid company 1-2 trillion yen and the retail unit at just under 6 trillion yen, the person said. The hydropower and renewable unit is expected to have 100 billion yen in annual revenues.

Tepco is aiming for each unit to be profitable on its own, the person said.

The latest revision to Tepco’s reorganization plan is expected to be completed by the end of the year.

Tepco is considering splitting into various units to be placed under the holding company, but nothing has been decided, a company spokesman said by phone.

The March 2011 earthquake and tsunami triggered three reactor meltdowns at Tepco’s Fukushima Daiichi plant north of Tokyo.

In the more than three years since the disaster, the utility has been plagued by a string of setbacks at the Fukushima station, including leaks of highly radioactive water last year, prompting the government to step in with more support.

The disaster led to the shutdown of all of Japan’s reactors, which are being subject to tougher safety standards. Two reactors in southwestern Japan have received preliminary approval to restart, but they are unlikely to be activated this year. ($1 = 102.3200 Japanese yen) (Reporting by Kentaro Hamada and Taro Fuse; Writing by James Topham; Editing by Aaron Sheldrick and Muralikumar Anantharaman)

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