TOKYO Tokyo Electric Power Co (9501.T) (TEPCO) and Kansai Electric Power Co (9503.T), Japan's two biggest utilities, forecast on Monday record losses for this business year due to soaring energy prices.
TEPCO's earnings have been hit hard since a powerful earthquake last July forced it to indefinitely halt operations at its Kashiwazaki-Kariwa nuclear plant in northern Japan.
The closure of the plant, which accounts for about 13 percent of TEPCO's total power capability, has prompted it to increase purchases of crude and fuel oil to work its thermal plants harder as well as buy electricity from other firms.
The utility said it expects the plant shutdown to increase its fuel and electricity purchase costs by over 700 billion yen this fiscal year.
TEPCO said it expects a group net loss of 280 billion yen ($2.60 billion) for the year ending in March 2009, wider than the 150.11 billion yen loss it posted last business year. TEPCO announced its full-year business outlook for the first time on Monday.
It also projected a pretax recurring loss of 425 billion yen for 2008/09, compared with an average forecast of a 234.6 billion yen loss from 10 analysts polled by Reuters Estimates.
The company forecast an annual dividend of 60 yen, down from 65 yen last business year.
For its April-June fiscal first quarter, TEPCO posted a net loss of 76.24 billion yen, compared with a 31.07 billion yen profit a year earlier.
Kansai, meanwhile, projected a net loss of 55 billion yen for 2008/09, compared with its April forecast for a 69 billion yen profit. That would mark its first loss in 29 years.
The Osaka-based company did not change its annual dividend forecast of 60 yen per share.
Kansai said its fuel purchase costs are expected to top its initial projections by over 200 billion yen.
The downgrade also comes as the restart of Kansai's 1,180-megawatt Ohi No.3 nuclear generator is set to be delayed until end-October from the initial schedule of June, boosting its demand for fuel.
As a result, Kansai now expects to burn 11.06 million kilolitres of fuel oil equivalent of energy in 2008/09, up from 10 million kl of fuel oil equivalent in its March forecast.
TEPCO ASSUMES NO NUCLEAR PLANT RESTART
TEPCO's outlook is based on the assumption that it will not restart the Kashiwazaki-Kariwa plant this fiscal year.
The utility said it expected its nuclear power plants to operate at an average of about 43 percent of capacity in the year through March, versus 44.9 percent last business year.
That compares with a run rate of 74.2 percent in the year ended March 2007, before the shutdown of the 8.21 million kilowatt Kashiwazaki-Kariwa plant, the world's largest nuclear plant.
Despite lost output from the plant, TEPCO has said it expects to have enough capacity to meet peak electricity demand forecast for this summer.
TEPCO received government approval on Monday to use the 900-megawatt Shiobara hydropower plant north of Tokyo between July 28 and Sept. 12 in case of an emergency power shortage. That plant had previously been ordered shut by the government due to improper operations.
It also said it expects to raise its utility bills for an average household by 12 percent, the sharpest hike ever, from January to pass on higher prices of oil, liquefied natural gas (LNG) and coal.
An average household using 290 kilowatt hours of electricity a month will see an increase of around 800 yen a month, from the current 6,797 yen, TEPCO said.
The hike assumes a Japan Crude Cocktail (JJC) price, or the average price of customs-cleared crude oil imports, of $130 a barrel, in July-September.
The increase comes despite some 270 billion yen worth of cost cuts over the past two years, TEPCO President Masataka Shimizu told reporters.
He said the impact of the recent rise in crude oil prices is "beyond" the level that the company can offset through its efforts alone.
(Reporting by Osamu Tsukimori and Chikafumi Hodo; Editing by Chris Gallagher)