Tokyo Electric (Tepco) and Chubu Electric have decided to fully integrate their thermal power operations within two to three years. The operations, which account for half of Japan’s total thermal power capacity, will be brought together under the auspices of Jera Co. - a thermal power and fuel company jointly set up in 2015.
The two companies both import large quantities of LNG as feedstock for their gas fired power plants in Japan, and any tie-up will enhance their buying and negotiating power when it comes to renegotiating crude price-linked long term LNG supply deals. On average Japan pays more for its LNG than any other country, due to these high priced legacy term deals, along with its location at some distance from any LNG source. But spot prices are now lower and importers can buy from sources including the US, indicating opportunities to lower costs in future. Tepco hopes the integration will improve profitability at its thermal power operations sufficiently to help secure funds to clean up the March 2011 meltdowns at its Fukushima plant.
A broad agreement on the integration is expected in the near future, in line with an outline of Tepco’s new business rehabilitation program, which is due out later in March.