April 1, 2019 / 8:30 AM / in 21 days

Japan's JERA becomes energy behemoth with power station business

TOKYO (Reuters) - Japan’s JERA joint venture, the world’s biggest buyer of liquefied natural gas (LNG), became a major electricity generator on Monday with the formal takeover of power stations owned by its two shareholders.

The logo of JERA Co., Inc., the world's biggest LNG buyer, is displayed at the company office in Tokyo, Japan July 14, 2017. REUTERS/Issei Kato

The move, which was confirmed by a JERA spokesman and that proponents say should cut costs and boost efficiencies, is part of a broad restructure of Japan’s power industry in the wake of the 2011 Fukushima tsunami and nuclear disaster that exposed weaknesses in the structure of the country’s grid.

JERA, which is owned by Tokyo Electric Power and Chubu Electric Power, had earlier taken on fuel procurement for its two shareholders, Japan’s biggest and third-biggest utilities.

It has now assumed control of their fossil fuel power stations, giving it 68 gigawatts (GW) of mostly gas and coal-fired power generation capacity domestically, nearly half the country’s power generation, as well as 9 GW overseas.

Tepco and Chubu will continue to hold separately their transmission grids and retail businesses. Both companies also own nuclear power stations, but they are currently shutdown.

Japan’s government forced through more competition in the country’s highly regionalized $130 billion power market in the wake of the Fukushima meltdowns by allowing new entrants, encouraging renewables and supporting market trading of power.

JERA, with assets of 4 trillion yen ($36 billion), will control all aspects of the supply chain for power generation, including stakes in LNG projects, ships and an international fuel trading operation.

It also plans to build one of the world’s biggest hydrogen stations in Tokyo by mid-2020, supplying fuel cell vehicles and fuel cell buses.

The integration of the fossil fuel plants is the last of a three-step plan for JERA, which currently buys about 35 million tonnes of LNG annually, and also handles upstream energy assets and overseas power generation for its shareholders.

(Graphic: What a gas - tmsnrt.rs/2Ct0VmE)

Reporting by Aaron Sheldrick; Additional reporting by Florence Tan; Editing by Richard Pullin

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