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Tough task for TEPCO to rehabilitate despite new turnaround plan

Tokyo Electric Power Company Holdings Inc. (TEPCO) on March 22 released an outline of its new rehabilitation plan focusing on efforts to integrate its nuclear and power transmission and distribution businesses with other utilities, but sceptics and industry insiders say it is easier said than done.

Although TEPCO released the latest business turnaround plan, other major utilities are reluctant to partner with the beleaguered utility that carries a huge financial burden to deal with the accident at the Fukushima No. 1 Nuclear Power Plant. There are no prospects for whether and when the utility will be able to reactivate its Kashiwazaki-Kariwa Nuclear Power Plant in Niigata Prefecture, which TEPCO says is a key part of its efforts to improve its profitability. Such being the case, hurdles for TEPCO in rehabilitating itself remain high.

TEPCO Holdings Managing Executive Officer Seiichi Fubasami said at a news conference in Tokyo on March 22, "We will aim to reorganize our power transmission, distribution and nuclear power businesses to improve our corporate value."

TEPCO stipulated in its latest business turnaround plan that it would aim to set up entities such as a consortium with other major utilities in the early 2020s to jointly operate a power grid. With respect to issues involving its wide area business operation and joint material procurements with other utilities, TEPCO said in its new business plan that as a first step it would set up a "forum for sharing recognition" of the project at an early date. TEPCO is to reorganize its nuclear power business although it did not set a specific timeframe.

Other major utilities have persistent worries that if they were to form business tie-ups with TEPCO in which the state has a majority of voting shares, they could be forced to shoulder part of the costs of responding to the disaster at the Fukushima nuclear plant. Therefore, as to management policies of a consortium and the like over how much of profits earned should be allocated for dividends and investments, among other details, TEPCO's plan stipulated that the utility would sort out rules over to what extent the state would get involved in the management of such companies.

However, other power companies are highly cautious, with one senior official of a major utility saying, "Unless they show us specific policies, we can't trust them as we fear that we could really be caught in a pit." On the fact that TEPCO is expected to remain under de-facto state control until fiscal 2019, the senior official said, "Our concern has grown bigger as to how long the state will stand behind the company."

Meanwhile, there are various issues surrounding the Kashiwazaki-Kariwa plant, which TEPCO regards as its key project to boost its profitability. Niigata Gov. Ryuichi Yoneyama, who is cautious toward its restart, has said it will take "several years" to decide whether to approve the reactivation of the facility. Earlier this year, it came to light that TEPCO had filed a report in which it overestimated the quake-resistance of a key building at the nuclear complex, losing the confidence of local residents and stalling the Nuclear Regulation Authority's screening.

The outline of the latest business turnaround plan showed TEPCO's intention to tide over the problems by receiving expertise in dealing with the NRA and other similar organizations from other major utilities that have successfully restarted their reactors. But TEPCO faces a rough road ahead and it failed to incorporate into its plan specific prospects of when it would be reactivated.

The focus will now shift to who will be in charge of steering the company toward management reforms stipulated in the new rehabilitation plan. The government has unofficially asked Hitachi Ltd. honorary chairman Takashi Kawamura to succeed TEPCO Chairman Fumio Sudo. According to sources knowledgeable about the matter, Kawamura is positive about the proposal and discussions are underway over a new management setup. Attention is also focused on what will happen to TEPCO President Naomi Hirose and other current senior executives.

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