Tokyo Electric Predicts Narrower Loss on Cheaper Oil

By Megumi Yamanaka and Michio Nakayama

Jan. 30 (Bloomberg) -- Tokyo Electric Power Co., forced by an earthquake to shut the world’s biggest nuclear plant, forecast a narrower loss as lower crude oil prices reduced the cost of fuels used for generation.

Asia’s biggest utility estimated a net loss of 45 billion yen ($503 million) for the year ending March 31, compared with the 220 billion yen loss it forecast on Oct. 31, according to a statement to the Tokyo Stock Exchange today. The figure compares with the median estimate of a 57 billion yen loss in a survey of five analysts and a 150 billion yen loss a year earlier.

Japanese power producers are benefiting from oil’s 72 percent decline from a July record, while the yen’s 20 percent gain against the dollar in the past year has cut the cost of imported crude, natural gas and coal. Lower costs are helping utilities offset slower sales as industrial demand slumps and Japan heads for its worst postwar recession.

“The effects of cheaper oil and the strengthening of the yen will erase the impact of dropping industrial demand,” Tatsuya Tsunoda, a senior analyst at Mizuho Securities Co., said before the announcement.

For the nine months ended Sept. 31, Tokyo Electric’s net loss widened to 138 billion yen from 3.09 billion yen a year earlier. The company posted a pretax loss of 199 billion yen, compared with 157 billion yen a year ago, it said in a separate statement today.

“Because of the oil slump and strong yen, we’ll save about 33.5 billion yen in costs,” Akira Takahashi, general manger at the utility’s accounting department, told reporters today.

Power Sales Drop

The shares rose 1.4 percent to 2,830 today. They’ve lost 0.5 percent in the last six months compared with a 39 percent decline in the benchmark Topix index. The earnings results came after market closed.

Power sales to industrial users fell the most since 1972 in December, with record declines for Tokyo Electric and Chubu Electric Power Co., Japan’s third-biggest generator. Japanese manufacturers cut production an unprecedented 9.6 percent last month, the Trade Ministry said today.

Kansai Electric Power Co., the second-largest power utility, and Chubu Electric joined Tokyo Electric in forecasting a narrower loss today, citing drops in fuel costs.

Kansai, Chubu Electric

Kansai Electric estimated a narrower loss of 28 billion yen compared with the 64 billion yen loss forecast in October, it said in a statement today. Chubu Electric predicted a net loss of 54 billion yen compared with the 78 billion yen loss forecast in December.

Kansai’s shares gained 3.1 percent to close at 2,485 yen and Chubu’s rose 3.2 percent to 2,570 yen. Kansai shares climbed 3.8 percent in the last six month while Chubu increased 3.4 percent. The Topix Electric Power and Gas Index, which tracks 17 utilities, edged up 1.3 percent in the same period.

“The revisions in their full-year forecasts are unlikely to have an impact on the market as the upward changes were expected and have already been factored in,” Tsunoda said. “We can expect improved earnings in the fourth quarter.”

All three utilities made the previous forecasts based on assumptions that crude prices would stay above $100 a barrel in the year to March 31. Tokyo Electric in October pegged oil prices at $110 a barrel. Dubai crude, a benchmark for Japan, was at $43.28 a barrel on Jan. 30.

Tokyo Electric has been hurt the most by high oil prices since an earthquake in July 2007 forced it to close the Kashiwazaki Kariwa nuclear plant, which accounts for around 10 percent of the utility’s capacity. All five of the analysts surveyed by Bloomberg based their estimates on the assumption that at least some output would resume at the plant next fiscal year.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net; Michio Nakayama in Tokyo at mnakayama4@bloomberg.net.