Tokyo Gas, Other Companies May Bid for Gas Utility

By Megumi Yamanaka and Michio Nakayama

Aug. 21 (Bloomberg) -- Tokyo Gas Co., Japan's biggest distributor of the fuel, and two other companies are considering bidding for a gas utility that the country's northern city of Sendai may sell in April 2010.

``We are studying whether the acquisition will contribute to profit and whether our entrance into the area will benefit locals,'' spokesman Naoyoshi Ogake said. Tohoku Electric Power Co. and Japan Petroleum Exploration Co. are also considering the acquisition, Tohoku spokesman Mitsuhiro Takauchi and Japan Petroleum spokesman Shigeyoshi Hasegawa said by phone today.

The potential offers came after Sendai drafted plans to sell off Sendai Gas, which supplies more than 360,000 customers in six northern cities and towns. The companies wouldn't confirm a report by the Japanese-language Nikkei newspaper that they will make a joint bid of more than 60 billion yen ($547 million).

``There will be more and more state-owned gas distributors being sold to the private sector,'' Akio Nomura, chairman of the Japan Gas Association, told reporters in Tokyo today. ``Buyers need to explain to shareholders how they can benefit from such acquisitions.''

Nomura, who is also chairman of Osaka Gas Co., the nation's second-largest distributor of the fuel, said his company hasn't discussed buying Sendai Gas.

`Unprecedented Pace'

Sendai ``sees the need to privatize as soon as possible,'' the city's Gas Bureau said on its Web site. ``The circumstances of the industry are changing at an unprecedented pace because of tougher competition with other fuels and the liberalization of the gas business.''

Sendai in July formed a committee to discuss details of the privatization process after posting losses on gas distribution for the 15th consecutive year in the 12 months ended March 2006, according to the Gas Bureau's Web site.

``At the moment we are at the information-gathering stage,'' Hasegawa of Japan Exploration said. ``There's little we can do until the details of the sell-off plan are decided.'' Japan Exploration supplies natural gas to Sendai Gas, he said.

Japan's gas industry started deregulating in March 1995, and about 60 percent of the market was open to competition as of April 2007. There are 213 gas distributors throughout Japan, of which 33 are run by municipalities, according to the Gas Association.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.