Tepco, Chubu set a date for greater ties

OREANDA-NEWS. February 10, 2015. Japan's state-controlled utility Tokyo Electric Power (Tepco) and fellow domestic utility Chubu Electric Power are planning on formalising a joint venture by April, four months after their initial deal to form an alliance.

Tepco and Chubu signed a contract today on the tie-up and plans for their thermal power business through a 50:50 joint venture. The name of the new company remained undisclosed.

The utilities plan to start by April co-operating on new businesses, excluding their existing operations, in a first phase. This will cover fuel purchases, upstream investment and power generation. Transportation and fuel trading are scheduled to be integrated into the new firm by October, followed by the consolidation of each utility's existing fuel imports and overseas power generation and infrastructure operations by the summer of 2016. Discussions will continue on how to combine their existing domestic thermal power businesses.

Tepco and Chubu are looking to increase their bargaining power for fuel purchases against their overseas rivals, especially in the LNG market. The firms are Japan's two largest LNG importers with combined purchases of around 40mn t/yr, compared with around 38mn t/yr at South Korea's state-controlled Kogas — the world's largest single LNG importer. The duo's combined imports accounted for around 45pc of Japan's total LNG intake of 88.5mn t last year.

The two companies are already working together to build a new 600MW coal-fired power generation unit at Tepco's Hitachinaka plant in northeast Japan's Ibaraki prefecture. The new unit is scheduled to come on line by the 2020-21 fiscal year. Chubu has a 96.55pc majority stake in the Hitachinaka joint venture.