Mizuho 1038 power
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
185
On Slideshare
185
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Japan Industry Outlook / 38 2012 No.1 Table of Contents1, Comprehensive Industry - Japan 15, Broadcasting (Japanese only)2, Iron and Steel - Japan 16, Marine Shipping (Japanese only)3, Non-ferrous Metals - Japan 17, Logistics - Japan4, Paper and Pulp (Japanese only) 18, Electric Power - Japan5, Cement - Japan 19, City Gas (Japanese only)6, Chemicals - Japan 20, Retail - Japan7, Pharmaceuticals - Japan 21, Food and Beverage - Japan8, Petroleum - Japan 22, Food Service Industry - Japan9, Automobiles - Japan 23, Construction (Japanese only)10, Shipbuilding (Japanese only) 24, Real Estate and Housing - Japan11, General Machinery (Japanese only) 25, Travel and Tourism - Japan12, Electronics - Japan 26, Nonbank (Credit Cards & Credit) (Japanese13, IT Services - Japan only)14, Telecommunications - Japan 27, HR Service Industry (Japanese only) Contact: Industry Research Division Mizuho Corporate Bank, Ltd. mizuho.ird@mizuho-cb.co.jp
  • 2. FY2012 Japan Industry Outlook (Electric Power) Electric Power Summary■ Electric power sales by the 10 electric power firms in FY2011 are estimated to drop 6.7% from the previous fiscal year. In the first half, electric power sales dropped 7.9% from a year earlier due to the substantial weakening of demand in the wake of the Great East Japan Earthquake as well as the effects of power conservation efforts in response to power source shortages and the disappearance of the temperature factor seen amid the heat wave in FY2010. In the second half, power sales are estimated to fall 5.5% amid a supply capacity shortage across Japan, with the resumption of nuclear power plant operations after completion of regular inspections still not in sight and the prospect that almost all nuclear power stations will come to a halt by the end of the fiscal year. If the situation in Japan does not allow the resumption of nuclear power plant operations anytime soon, all nuclear power stations in the country will likely stop running by the end of April. However, if nuclear power plants, after the safety of their operations is confirmed, come back on stream one by one toward the summer, demand for electric power is likely to recover slowly but steadily in tandem with the improved supply capacity from the second quarter into the second half, and electric power sales in FY2012 are forecast to increase 3.2% over the previous fiscal year to 872.8 billion kWh, recovering the pre-Lehman Shock level.■ As for the nonconsolidated corporate earnings of the 10 electric power companies, ordinary income in FY2011 is estimated to worsen to a deficit of negative JPY 1.2 trillion, affected by the sharp fall in the operating rate of nuclear power plants due to the suspension of operations because of the damage from the earthquake and protracted regular inspections as well as increased fuel costs resulting from stepped-up operations of thermal power plants. Assuming a gradual resumption of nuclear operations, ordinary income is likely to improve to a deficit of negative JPY 0.2 trillion, as fuel costs are seen dropping and revenue from lighting and energy charges rising to reflect a recovery in power demand in tandem with the improving supply capacity. Capital spending is likely to expand in FY2011 due to construction of alterative thermal power facilities but to turn down in FY2012 as investment projects are pushed back amid the deteriorating earnings. Interest-bearing debt is expected to rise 3.1% to JPY 23.4 trillion in FY2011 and 3.5% to JPY 24.2 trillion in FY2012 because of necessary investments despite the worsening earnings.■ In the absence of the resumption of nuclear power generation, the electric power shortage this summer will spread across Japan, throwing the country into a more serious situation than last summer. There are limits to surplus power from private power generation or to power-saving and energy-saving efforts on the part of users, which in themselves do not represent a fundamental solution to the electric power shortage. In order to avert a devastating blow to the Japanese economy as well as people’s daily lives, the resumption of nuclear power plant operations is surely the issue we cannot escape from and the challenge we have to face up to before anything else. In order to obtain the understanding of municipal governments and residents of communities where the nuclear power plants are located, it is a matter of urgency that the government will take a political decision to guarantee the safety of nuclear power plants. 1 Mizuho Corporate Bank Industry Research Division
  • 3. FY2012 Japan Industry Outlook (Electric Power)I. INDUSTRY TREND1. Electric power sales in FY2012 are seen as rising 3.2%, with the supply capacity set torecover on resumption of nuclear power plant operations Electric power Electric power sales in FY2011 are estimated to drop 6.7% from the previous sales in FY2011 fiscal year, falling even below the level of FY2009, when they were pummeled estimated to fall by the Lehman Shock. Looking at factors affecting electric power sales, lower 6.7% due to the earthquake and demand ascribable to the Great East Japan Earthquake and energy conservation conservation efforts due to power source shortages together will likely push them down by efforts linked to 4.5% (the economic/energy conservation factors). In reaction to the strong power source air-conditioning demand in FY2010 amid the record-setting heat wave, the shortages temperature factor is also expected to pull down electric power sales by 2.2% (Figure 18-1). By demand category, demand for household use in the first half of FY2011 dropped 8.1% from a year earlier for the 10 electric power firms combined. Household use demand slumped 12.3% in the service areas of Tohoku Electric Power and Tokyo Electric Power, and also fell 5.0% in western Japan primarily due to the temperature factor. In the second half, the margin of the year-on-year drop in household use demand is expected to narrow to 6.9% in the service areas of Tohoku Electric Power and Tokyo Electric Power, but demand in western Japan is likely to drop 5.4%, affected by the supply capacity shortfall due to the suspension of nuclear power plant operations, resulting in a decline of 6.1% for the 10 power firms combined. As a result, for the full year, demand for household use is estimated to decrease 7.1% from FY2010 (Figure 18.2). Demand for commercial use in the first half of FY2011 plunged 18.8% from the same period of FY2010 in the service areas of Tohoku Electric Power and Tokyo Electric Power. With the decline under the impact of the earthquake and due to the temperature factor even larger than that in the household sector, commercial use demand fell 11.3% from a year before for the 10 power firms combined. In the second half, commercial use demand is estimated to drop 7.8% from the year-earlier period for the 10 power firms, with a fall of 9.8% in the service areas of Tohoku Electric Power and Tokyo Electric Power and 6.2% in western Japan. For the full FY2011, demand for commercial use is expected to dip 9.7% from the previous fiscal year (Figure 18-2). Demand for industrial use in the first half of FY2011 declined 5.1% year on year for the 10 power firms combined, though smaller than the 11.3% drop in the service areas of Tohoku Electric Power and Tokyo Electric Power. While the margin of demand shrinkage is expected to be smaller in the second half in the service areas of Tohoku Electric Power and Tokyo Electric Power, the supply capacity shortage will likely result in a 2.0% fall in industrial use demand in western Japan, leading to a decline of 3.2% for the 10 power firms. 2 Mizuho Corporate Bank Industry Research Division
  • 4. FY2012 Japan Industry Outlook (Electric Power) For FY2011 as a whole, demand for industrial use is estimated to drop 4.2% from the previous year. Compared with household and commercial demand, demand for industrial use will likely see a smaller year-on-year fall, as many industrial plants have shifted to nighttime operations in an effort to cut back on power consumption during peak hours (Figure 18-2).Electric power Electric power sales in FY2012 are forecast to increase 3.2% over the previoussales in FY2012 fiscal year to return to the levels seen before FY2009. If the situation in Japanexpected to rise3.2% on gradual does not allow the resumption of nuclear power plant operations anytime soon,recovery in all nuclear power stations in the country will likely stop running by the end ofdemand in April. However, if nuclear power plants, after the safety of their operations isresponse to the confirmed, come back on stream one by one toward the summer, the powerimproving supplycapacity. supply capacity is expected to improve gradually, and in response demand for electric power is also likely to recover slowly but steadily from the second quarter into the second half of FY2012 (Figure 18-1). By demand category, demand for household use in the first half of the fiscal year is expected to dip 0.6% from a year before in western Japan, but is likely to recover with a gain of 6.2% in the service areas of Tohoku Electric Power and Tokyo Electric Power, rising 2.2% for the 10 power firms combined. With the supply capacity improving further in the second half, household use demand is forecast to rise 4.8% in the service areas of Tohoku Electric Power and Tokyo Electric Power and 4.0% in western Japan for a 4.3% increase for the 10 power firms combined. For the full FY2012, demand for household use is expected to rise 3.3% over FY2011 to 292.1 billion kWh, rolling back the decline in the wake of the earthquake to recover to the FY2007 level before the Lehman Shock, though still short of the all-time high recorded in FY2010 (Figure 18-2). Showing a similar pattern with household use demand, demand for commercial use is likely to dip 0.7% in western Japan but increase 5.8% in the service areas of Tohoku Electric Power and Tokyo Electric Power in the first half. The recovery in demand in the service areas of Tohoku Electric Power and Tokyo Electric Power will likely lead to an increase of 1.9% for the 10 power firms combined. Commercial use demand is expected to repeat this performance in the second half to post a year-on-year rise of 5.2% for the 10 power firms combined, and is forecast to increase 3.5% for the full year. In terms of actual figures, however, demand for industrial use is forecast to remain subdued at 236.5 billion kWh in FY2012, unable to recoup even half of the drop caused by the earthquake. Thus, a recovery in demand in the commercial sector is likely to lag behind the household sector (Figure 18-2). Demand for industrial use in the first half of FY2012 is expected to move sideways from a year earlier, with a marginal gain of 0.1%, but is likely to grow 4.6% in the service areas of Tohoku Electric Power and Tokyo Electric Power, 3 Mizuho Corporate Bank Industry Research Division
  • 5. FY2012 Japan Industry Outlook (Electric Power) for an increase of 1.7% for the 10 power firms combined. In the second half, if the problem of the supply capacity shortage stemming from the suspension of nuclear power plants moves toward a resolution, industrial use demand is expected to recover significantly in both western Japan and the service areas of Tohoku Electric Power and Tokyo Electric Power, leading to a year-on-year advance of 4.1% for the 10 power firms combined. For the full year, demand is forecast to grow 2.9% over the previous fiscal year to 344.3 billion kWh, rolling back the earthquake-caused decline to recover the pre-quake level (Figure 18-2). [Figure 18-1] Fluctuation Factors of Electric Power Sales Source: Compiled by MHCB Industry Research Division based on monthly reports on electric power statistics, power firms’ electric power supply plans, financial statements, etc. Note: Figures are actual results of the 10 electric power firms (the sum of Hokkaido Electric Power, Tohoku Electric Power, Tokyo Electric Power, Chubu Electric Power, Hokuriku Electric Power, Kansai Electric Power, Chugoku Electric Power, Shikoku Electric Power, Kyushu Electric Power and Okinawa Electric Power. The same definition is applicable to “the 10 electric power firms” hereinafter). Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division calculations. [Figure 18-2] Electric Power Sales Outlook [Actual] S ummary 10fy 11fy 12fy 10/1H 10/2H 11/1H 11/2H 12/1H 12/2H (Unit) (Result) (Estimate) (Forecast) (Result) (Result) (Result) (Estimate) (Forecast) (Forecast) Electric Power Sales (100 m. kWh) 9,064 8,459 8,728 4,583 4,482 4,222 4,237 4,303 4,425 Household Use (100 m. kWh) 3,042 2,828 2,921 1,462 1,581 1,343 1,485 1,372 1,549 Commercial Use (100 m. kWh) 2,528 2,284 2,365 1,327 1,201 1,177 1,107 1,200 1,165 Industrial Use (100 m. kWh) 3,494 3,347 3,443 1,794 1,700 1,702 1,645 1,732 1,711 [Rate of Increase/Decrease] (Year on Year) (Year on Year) S ummary 10fy 11fy 12fy 10/1H 10/2H 11/1H 11/2H 12/1H 12/2H (Unit) (Result) (Estimate) (Forecast) (Result) (Result) (Result) (Estimate) (Forecast) (Forecast) Electric Power Sales (% ) + 5.6% - 6.7% + 3.2% + 8.8% + 2.5% - 7.9% - 5.5% + 1.9% + 4.4% Household Use (% ) + 6.8% - 7.1% + 3.3% + 10.2% + 3.7% - 8.1% - 6.1% + 2.2% + 4.3% Commercial Use (% ) + 2.4% - 9.7% + 3.5% + 4.4% + 0.3% - 11.3% - 7.8% + 1.9% + 5.2% Industrial Use (% ) + 6.9% - 4.2% + 2.9% + 11.1% + 2.9% - 5.1% - 3.2% + 1.7% + 4.0%Source: Compiled by MHCB Industry Research Division based on monthly reports on electric power statistics, power firms’ electric power supply plans, financial statements, etc.Note: Figures are actual results of the 10 electric power firms. Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division calculations. Figures may not add up to totals due to rounding. 4 Mizuho Corporate Bank Industry Research Division
  • 6. FY2012 Japan Industry Outlook (Electric Power)2. Power Supply Depends on Nuclear Power Resumption, High Thermal Usage Likely to Continue Power output in Electric power output in FY2011 is estimated to fall 7.0% from the previous FY2011 fiscal year to 918.9 billion kWh against the backdrop of the steep fall-off in supported by demand in the wake of the devastating earthquake. By type of power generation, higher thermal generation, with the operating rate of nuclear power plants plummeted to 36% in the first half the nuclear due to the earthquake and the inability to resume operations after completion of operating rate regular inspections. With the operating rate expected to drop further to 11% in seen dipping to the second half, the operating rate for the full year is likely to come to 24%, and 24% if the suspension of nuclear power output is estimated to suffer a steep fall of 64.7% from FY2010. operations stays Hydraulic power output is expected to drop 1.7% from the previous year. Though the water flow rate is seen to exceed the previous fiscal year’s level, power output with pumped-up water is likely to decline due to the stagnating operating rate of nuclear power plants. On the other hand, thermal power output is estimated to chalk up a sharp increase of 22.4% over the previous fiscal year, including emergency power sources to make up for the shortfall of power supply capacity resulting from the suspension of nuclear power plant operations (Figure 18-3). By type of fuel, LNG is at its full blast in substitution for nuclear power, the base power source, and is likely to mark all-time highs in terms of both the operation rate, at 62%, and consumption, at 51.65 million tons, an increase of 23.7% over the previous fiscal year. Coal consumption for power generation in the first half declined 7.3% from a year earlier, as key coal-burning power plants at Haramachi, Soma Kyodo Power, Joban Kyodo Power and Hirono were damaged by the Great East Japan Earthquake. However, in the second half, when the damaged thermal power plants are expected to come back on stream, coal consumption is expected to rise 6.4% as the operating rates of coal-burning power plants are increased to cover the power supply capacity shortage created by the suspension of nuclear power plant operations. Yet, for the full year, coal is still expected to post a slight 0.2% drop from the previous fiscal year. With the supply capacity still falling short despite full-throttle operations of coal- and LNG-burning thermal plants, petroleum is functioning as a regulating power source, with petroleum consumption for power generation in FY2011 estimated to surge 113.5% over the previous fiscal year to 23.61 million kiloliters, matching the consumption level of FY2007 when the Niigataken Chuetsu-oki Earthquake hit (Figure 18-4). Electric power output in 2012 Electric power output in FY2012 is expected to increase 3.1% over the previous will still depend fiscal year to 947.7 billion kWh. By type of power generation, nuclear power is on higher thermal likely to rise 52.8% over a year earlier on a power output basis. The Tomari No. generation, 3 nuclear power plant is scheduled to go into regular inspection by the end of though the rolling blackout can be April 2012, and this will cap the suspension of all nuclear power plants in avoided with Japan. However, assuming that nuclear power plants, after the safety of their resumption of operations is confirmed, come back on stream one by one from around June nuclear power plant operations 5 Mizuho Corporate Bank Industry Research Division
  • 7. FY2012 Japan Industry Outlook (Electric Power)toward the summer, the operating rate of nuclear power generation is likely torecover to up to 55% in the second half from the stagnant 17% in the first half,bringing the full-year operating rate to 36%. Assuming average water flow rates,hydro power output is expected to rise 1.0% over the previous fiscal year, withpower output from pumped-up water likely to recover in tandem with theresumption of operations of nuclear power plants. If nuclear power outputrecovers, thermal power generation is expected to fall 3.6% from the previousfiscal year (Figure 18-3). Even if nuclear power plants are allowed to resumeoperations, which should help avoid the rolling blackout, thermal power plantsare likely to continue running at a high operating rate as demand for electricpower is also expected to recover. By type of fuel, LNG, which registered ayear-on-year increase of 10.5% in the first half as an alternative to nuclearpower, is forecast to decline 10.6% in the second half in response to theresumption of nuclear power. All in all, LNG is expected to largely level offfrom the previous fiscal year, with a minor drop of 0.5%. After marking ayear-on-year increase of 22.5% in the first half on the resumption of operationsof coal-burning thermal plants damaged by the earthquake, coal consumption isestimated to decline 11.1% in the second half in response to the lower operatingrate of coal-burning plants. For the entire FY2012, coal is expected to see amodest rise of 4.0% over the previous fiscal year, with the operating ratecoming to 76%. Petroleum, which soared 59.7% over a year earlier in the firsthalf, is expected to fall back sharply by 50.7% in the second half, with a declineof 15.9% for the full year (Figure 18-4).If the resumption of nuclear power plant operations is delayed further and thepower supply shortage is to be covered by increased output frompetroleum-burning thermal power plants, the additional fuel cost is estimated atJPY 46.5 billion per 1% drop in the operating rate of nuclear power plants (theadditional fuel cost would be JPY 35.2 billion, if LNG-fired thermal powerplants are to cover the supply shortfall). Furthermore, assuming that no nuclearpower plants are running to produce power in summer, when power demandmarks the highest level in the year, the supply falls short of the demand even ifthermal power plants operate at full throttle. Then, Japan as a whole must cutthe demand (=maximum electric power) by around 5%. In order to avoid suchan abnormal development, which would not only undermine the capital base ofelectric power companies but also have a profound impact on the Japaneseeconomy and daily lives of Japanese people, it is imperative to secure the veryminimum of power supply capacity. 6 Mizuho Corporate Bank Industry Research Division
  • 8. FY2012 Japan Industry Outlook (Electric Power) [Figure 18-3] Electric Power Output Outlook [Actual] S ummary 10fy 11fy 12fy 11/1H 11/2H 12/1H(For 12/2H(For (Unit) (Result) (Estimate) (Forecast) (Result) (Estimate) ecast) ecast) Electric Power Output (100 m. kWh) 9,876 9,189 9,477 4,562 4,627 4,655 4,805 Hydraulic (100 m. kWh) 629 618 624 386 232 388 237 Thermal (100 m. kWh) 4,854 5,943 5,727 2,675 3,268 3,075 2,634 Nuclear (100 m. kWh) 2,713 958 1,464 740 218 348 1,116 [Rate of Increase/Decrease] (Year oon Year) (Year on Year) S ummary 10fy 11fy 12fy 11/1H(Re 11/2H(Est 12/1H(For 12/2H (Unit) (Result) (Estimate) (Forecast) sult) imate) ecast) (Forecast) Electric Power Output (% ) + 5.1% - 7.0% + 3.1% - 8.1% - 5.8% + 2.0% + 3.8% Hydraulic (% ) + 9.0% - 1.7% + 1.0% - 2.6% - 0.1% + 0.3% + 2.3% Thermal (% ) + 6.3% + 22.4% - 3.6% + 12.5% + 31.9% + 15.0% - 19.4% Nuclear (% ) + 1.9% - 64.7% + 52.8% - 46.2% - 83.7% - 53.0% + 411.6% [Facility Usage Rate] S ummary 10fy 11fy 12fy 11/1H(Re 11/2H 12/1H(For 12/2H(For (Unit) (Result) (Estimate) (Forecast) sult) (Estimate) ecast) ecast) Hydraulic (% ) 【Figure 18-4】 Fuel20% 20% 20% 25% 15% Consumption Outlook 25% 15% Coal (% ) 73% 74% 76% 67% 80% 80% 71% Thermal Oil (% ) 15% 30% 24% 20% 40% 27% 19% LNG (% ) 53% 62% 59% 60% 64% 62% 56% Nuclear (% ) 67% 24% 36% 36% 11% 17% 55% Source: Compiled by MHCB Industry Research Division based on summaries of electric power supply plans and monthly reports on electric power statistics. Note: Figures are actual results of the 10 electric power firms. Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division calculations. Facility usage rates found in the text are estimates based on facilities of the 10 electric power firms (including suspended facilities). [Figure 18-4] Fuel Consumption Outlook [Actual] S ummary 10fy 11fy 12fy [Rate of Increase/Decrease](Year on Year) (Unit) (Result) (Estimate) (Forecast) 10fy 11fy 12fy Coal (1,000 t) 46,888 46,782 48,652 (Result) (Estimate) (Forecast) Oil (Heavy Crude) (1,000 kl) 11,058 - 2.0% 23,612 - 0.2% 19,846 + 4.0% LNG (1,000 t) 41,743 + 19.9% 51,650 + 113.5% 51,374 - 15.9% (Source) Compiled by MHCB Industry Research Division based on summaries of electric power supply -plans and + 3.5% + 23.7% 0.5% monthly reports on electric power statistics. (Note) Figures are actual results of the 10 electric power firms. Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division calculations.II. CORPORATE EARNINGS1. With Fuel Costs Falling and Sales Rising, Ordinary Loss in FY2012 Expected to Narrow to Deficit of Negative JPY 0.2 trillion Fuel costs surging Ordinary revenue in FY2011 is estimated to dip 0.1% from the previous fiscal in FY2011 year to JPY 15.6 trillion, primarily because electric power sales are expected to following the suspension of decrease substantially due to the effects of the earthquake and the supply nuclear power capacity shortage associated with the suspension of nuclear power plant plants; Ordinary operations. Fuel costs, including nuclear fuel cost, meanwhile, are likely to loss seen surge 61.2% over FY2010 to JPY 5.9 trillion, with fossil fuel consumption markedly expanding to expanding 33.9% and fossil fuel prices rising 27.5%. Electric power purchase negative JPY 1.1 costs are expected to rise 9.0% over the previous year. While quantities of trillion power purchased are estimated to edge down 0.7% due to declines in power 7 Mizuho Corporate Bank Industry Research Division
  • 9. FY2012 Japan Industry Outlook (Electric Power) receipts from Japan Atomic Power Co. and other companies, the average unit price is forecast to increase by 9.7%. Overall ordinary expenses are seen rising 13.6% to JPY 16.8 trillion, and ordinary income is expected to register a deficit of negative JPY 1.2 trillion (Figure 18-5). Ordinary income Ordinary revenue in FY2012 is estimated to rise 1.1% over the previous year to expected to JPY 15.8 trillion on a recovery of electric power sales, provided that the improve to a resumption of nuclear power plant operations becomes a reality. Overall fuel deficit of negative JPY 0.2 trillion in costs, including nuclear fuel costs, are expected to decline 14.5% to JPY 5.0 FY 2012, on trillion, with fossil fuel consumption turning down 4.3% and fossil fuel prices higher power also dropping 10.0%. Electric power purchase costs are likely to fall 2.2%, as sales resulting quantities of purchases are estimated to dip 0.6%, due to a drop in power from resumption of nuclear power interchanges among service areas and the average unit price is also expected to plant operations fall 1.6%. Overall ordinary expenses are likely to drop 4.6% from the previous and lower fuel fiscal year to JPY 16.0 trillion. On substantially lower expenses coupled with costs higher ordinary income, ordinary income is expected to improve to a narrower deficit of negative JPY 0.2 trillion (Figures 18-5, 18-6). [Figure 18-5] Corporate Earnings Outlook [Actual] [Rate of Increase/Decrease](Year on Year) (Firm ) 10fy 11fy 12fy 10fy 11fy 12fy (unit) (Result) (Estimate) (Forecast) (Result) (Estimate) (Forecast) (10)(JPY 100 Ordinary revenue m.) 156,210 156,021 157,771 + 5.4% - 0.1% + 1.1% (10)(JPY 100 Ordinary expenses m.) 147,768 167,813 160,118 + 4.4% + 13.6% - 4.6% (10)(JPY 100 Fuel cost m.) 36,617 59,013 50,450 + 19.9% + 61.2% - 14.5% (10)(JPY 100 Power purc m.) 21,263 23,177 22,672 + 6.6% + 9.0% - 2.2% (10)(JPY 100 Depreciati m.) 20,750 19,846 19,996 - 2.5% - 4.4% + 0.8% (10)(JPY 100 Other fixed m.) 69,138 65,778 66,999 - 0.9% - 4.9% + 1.9% (10)(JPY 100 ordinary income m.) 8,442 -11,793 -2,347 + 27.0% - - (10)(JPY 100 Net assets m.) 75,756 58,319 52,636 - 11.6% - 23.0% - 9.7%Source: Compiled by MHCB Industry Research Division based on the power firms’ press releases, financial statements, etc.Note 1: Figures are actual results of the 10 electric power firms. Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division forecasts.Note 2: Assumptions for fuel prices (imports, CIF): [FY2011] Oil 113$/bbl, LNG 808$/t, coal 133$/t, exchange rate 79 yen/$; [FY2012] Oil 105$/bbl, LNG 744$/t, coal 120$/t, exchange rate 76 yen/$Note 3: This outlook does not take into consideration the financial burden of nuclear operators, Tokyo Electric Power’s compensation for the nuclear power plant accident or the effects of power rate increases (for Tokyo Electric Power, the power rate hikes in the deregulated market are expected to reduce fuel costs by JPY 400 billion). 8 Mizuho Corporate Bank Industry Research Division
  • 10. FY2012 Japan Industry Outlook (Electric Power) [Figure 18-6] Analysis of Factors Affecting Ordinary Income 1.0 (JPY 1 trillion) 0.5 Other Other increased increased earnings cost 0.0 +0.14 Falling -0.14 Rising Other unit Lower Rising power lower price -▲ 0.5 sales unit purchase cost -0.17 volume price cost +0.43 -0.96 +0.80 -0.19▲ 1.0 - Other Lower Increased lower fuel▲ 1.5 Increased sales earnings cost - +0.85 fuel volume -0.11 cost +0.45 -▲ 2.0 -2.24 <Revenue> <Costs> <Revenue> <Costs> 0.84 -1.18 -0.23 FY10 FY11 FY12 Ordinary income Ordinary income Ordinary income Source: Compiled by MHCB Industry Research Division based on the power firms’ press releases, financial statements, etc. Note: Figures are based on MHCB Industry Research Division estimates. Figures may not add up to totals due to rounding.2. Capital Spending in FY2012 Seen to Dip, Nonessential Investments Put on the Back Burner Capital spending Capital investment spending in FY2011 is estimated to expand 18.7% over the in FY2012 seen to previous year to JPY 2.5 trillion, as a result of increased investment in power dip, with source facilities, including the construction and installation of alternative nonessential investments being thermal power facilities as emergency steps to make up for the supply capacity put on the back shortfall. But capital spending in FY2012 is expected to turn down 3.3% from burner FY2011 to JPY 2.4 trillion, despite the construction and installation of emergency power sources toward summer, as nonessential capital investments are being put on the back burner amid the deteriorating earnings. Interest-bearing Meanwhile, interest-bearing debt in FY2011 is expected to rise 3.8% over the debt expected to previous year to JPY 23.4 trillion, due to increased capital spending, including rise to JPY 23.4 emergency responses to the supply capacity shortage, and higher fuel costs, trillion in FY2011, and to despite the deteriorating earnings of electric power companies. In FY2012, the JPY 24.2 trillion balance of interest-bearing debt is likely to grow further by 3.8% to JPY 24.2 in FY2012, as trillion. While their ordinary losses are expected to shrink, deficit-running power firms have electric power firms still have to make necessary investments in power sources, to make necessary investments and their “cash in” cannot offset “cash out.” despite the deteriorating With earned surplus falling into the red due to the deteriorating earnings, the earnings shareholders’ equity ratio is estimated to drop to 14.1% in FY2011 (down 4.2 points year on year) and further to 13.1% in FY2012 (down 1.2 points year on year). 9 Mizuho Corporate Bank Industry Research Division
  • 11. FY2012 Japan Industry Outlook (Electric Power) [Figure 18-7] Changes in Capital Spending [Figure 18-8] Changes in Interest-Bearing Debt and and Depreciation Shareholders’ Equity Ratio (JPY 1 trillion) (JPY 1 trillion)6.0 Nuclear fuel 35 Shareholdrs equity ratio 30% Short-term borrowings 30 (right axis)5.0 25% 254.0 20% Long-term borrowings Distribution facilities, etc. Depreciation cost 203.0 15% 152.0 10% 101.0 5% 5 Corporate bonds Power supply facilities, etc.0.0 0 0% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Compiled by MHCB Industry Research Division based on the power firms’ financial statements, electric power supply plans, etc. Note: Figures are actual results of the 10 electric power firms. Figures for FY2011 and FY2012, however, are based on MHCB Industry Research Division forecasts. Interest-bearing debt is the sum of short-term borrowings, commercial paper, corporate bonds, convertible bonds and long-term borrowings. III. TOPICS: For Ensuring the Stable Electric Power Supply Capacity – Resumption of Nuclear Power Generation Imperative It is still fresh in our minds that Japan has got through the electric power shortage in the Tohoku and Kanto regions in spring 2011 by rolling blackouts and mandatory curbs on power consumption during the summer. Then what about the power supply and demand in summer 2012? Can we rest assured, unlike last year? Power supply in As pointed out in the main text, without the resumption of nuclear power acute shortage in generation anytime soon, all nuclear power plants in Japan are expected to summer 2012 grind to a halt by April 2012. Electric power supply from nuclear power without resumption of nuclear power stations would be nil, and assuming a maximum demand power similar to the generation 2010 level, the power shortage is likely to spread across the country this summer (Figure 18-9). There is the view that the “supply shortages can be covered with the utilization of surplus power from private power generation (so-called ‘buried power’).” However, the peak of power demand comes during daytime in summer. Usually, private power generation is also in operation during daytime. Thus, the surplus power available during the peak demand hours is limited to around 3.3 million kW, far from covering and eliminating the supply capacity shortfall (Figure 18-10). 10 Mizuho Corporate Bank Industry Research Division
  • 12. FY2012 Japan Industry Outlook (Electric Power) [Figure 18-9] Supply and Demand in Summer 2012 (Case of No Resumption of Nuclear Power Plant Operations) A B C A-B-C (Unit:Million kW) Nuclear Thermal/pumped Maximum (Quake hydro usage rate Supply capacity Maximum 2012 Electric power company damage/Regular (Summer 2012) output consideration demand Reserve rate inspection) Hokkaido 8.2 2.1 0.6 5.6 5.8 - 3.4% Eastern Japan Tohoku 21.9 3.5 3.1 15.3 15.6 - 1.8% Tokyo 77.2 18.2 4.3 54.7 60.0 - 9.7% Total 107.3 23.8 8.0 75.6 81.3 - 7.6% Chubu 36.0 4.1 3.7 28.1 27.1 3.6% Hokuriku 9.3 2.2 0.4 6.6 5.7 13.7% Western Japan Kansai 38.7 10.3 2.7 25.7 31.0 - 20.3% Chugoku 16.1 1.3 1.6 13.2 12.0 8.8% Shikoku 8.9 2.0 0.7 6.2 6.0 3.8% Kyushu 23.3 5.3 1.8 16.2 17.5 - 7.9% Total 132.2 25.2 11.0 96.1 99.2 - 3.3% Japan Total 239.6 49.0 18.9 171.7 180.6 - 5.2% Source: Compiled by MHCB Industry Research Division based on the power firms’ websites and the Electric Power Industry Handbook, etc. Note 1: Figures are calculated by discounting such factors as the regular inspection/suspension of nuclear power plants, thermal power plant usage rate (90%) and pumped hydro power plant usage rate (60%) from the power firms’ maximum output (assuming 100% facility usage rate). Note 2: Power interchanges among the electric power firms are not taken into account, in principle. [Figure 8-10] Surplus Power from Private Power Generation (Unit:Million kW) No. of power Output power Facility Reserve rate Facility usage RemainingElectric power company plants (Thermal usage rate Surplus power Pre-surplus Post-surplus rate capacity (Thermal only) only) ceiling power power Hokkaido 141 1.9 44.4% 58.3% 13.9% 0.3 - 3.4% 1.3% Tohoku 257 5.4 54.9% 58.3% 3.4% 0.2 - 1.8% - 0.3% Tokyo 737 15.3 47.8% 58.3% 10.5% 1.6 - 9.7% - 6.5% Chubu 386 4.5 58.7% 58.3% 0.0% 0.2 3.6% 4.4% Hokuriku 49 0.4 37.5% 58.3% 20.8% 0.1 13.7% 14.6% Kansai 400 6.6 50.5% 58.3% 7.8% 0.5 - 20.3% - 17.9% Chugoku 224 6.8 58.9% 58.3% 0.0% 0.1 8.8% 9.4% Shikoku 88 1.8 57.6% 58.3% 0.7% 0.1 3.8% 4.7% Kyushu 240 4.7 54.9% 58.3% 3.4% 0.2 - 7.9% - 6.5% Total 2,521 47.4 51.3% 58.3% 7.0% 3.3 - 5.2% - 3.2%Source: Compiled by MHCB Industry Research Division based on the power firms’ websites and the Electric Power Industry Handbook, etc.Note: Calculated based on the facility usage rate ceiling of 14 hours of daytime operations. The government’s Energy and Environment Council, as ways to deal with the power shortage in the absence of the resumption of nuclear power plant operations, has called for “promotion of energy-saving and electricity-saving efforts on the user side” and “enhancement of the supply capacity by electric power companies as well as users,” including the “visualization” of electric power consumption, the introduction of power rates based on the supply-demand conditions and support for energy-saving initiatives by users. But it will probably require a fair amount of time for these countermeasures to take a firm hold and to be reflected in the actual supply-demand situation. At 11 Mizuho Corporate Bank Industry Research Division
  • 13. FY2012 Japan Industry Outlook (Electric Power)least, they do not seem to be sure solutions to the impending power supplyshortage in summer 2012.The power shortage this summer engulfs the entire nation. Compared withsummer 2011, when Hokkaido and western Japan still had surplus power tomake available to other parts of the country, needless to say, the situation ismuch more serious this summer. An official at a manufacturing companycommented: “The burden on us of power-saving measures, including the shiftof operations to weekends and holidays implemented last summer, is prettyheavy. We never want to do it again.” Thus, it would not be realistic to go forpainful demand adjustments, like we did last summer, again.Under these circumstances, we believe that top priority should be given torestoring the power supply capacity by promptly allowing the resumption ofoperations of nuclear power plants currently suspended for regular inspections,thereby avoiding a heavy blow to the Japanese economy and people’s dailylives. Japan’s comprehensive energy policy and the electric power supplystructure in the future are now under consideration. However, it is as clear asday that we should not be discussing these important matters when we do nothave the very foundation of stable electric power supply in place.Maintaining and securing of the stable supply of electric power are directlylinked to Japan’s national interests. It is a matter of urgency that thegovernment will make a political decision to guarantee the safety of nuclearpower plants that have cleared stress tests. This step is also required to obtainthe understanding of municipal governments and residents of communitieswhere the nuclear power plants are located. We sincerely hope that thegovernment will exercise its strong leadership for a breakthrough in thechallenging situation. Yoshinobu Kashiwagi / Mihoko Ichikawa Energy Team Industry Research Division Mizuho Corporate Bank, Ltd. 12 Mizuho Corporate Bank Industry Research Division