Japan's Tepco, Chubu eye $910 million cost cut from merging fossil businesses

FILE PHOTO: A Tokyo Electric Power Co. (TEPCO) logo is seen on a uniform of an employee at the company's Fukushima Daiichi nuclear power plant in Okuma, Fukushima, Japan, February 23, 2017. REUTERS/Tomohiro Ohsumi/Pool

TOKYO (Reuters) - Tokyo Electric Power Company Holdings (Tepco) and Chubu Electric Power Co said on Thursday they aim to cut costs by more than 100 billion yen ($910 million) a year within five years after combining their fossil fuel power plants under their JERA Co joint venture.

The two companies, which had agreed on the integration in March, signed a contract for this on Thursday.

The biggest and the third-biggest of Japan’s regional power utilities aim to combine the businesses in April-September 2019 to form a company that will oversee 68 gigawatts of capacity in the country and account for nearly half of domestic power generation.

One of the sticking points for Chubu was that Tepco was essentially nationalized after the Fukushima nuclear disaster in 2011, which may put pressure on JERA to provide ample dividends to help pay for decommission and compensation.

To relieve Chubu’s concerns, the two companies agreed to put in place the measures to limit the dividends to the parents so that JERA would receive enough internal reserves to make its expansion goals possible.

Reporting by Osamu Tsukimori; Editing by Subhranshu Sahu