Tokyo Gas, Partners Scrap Plan to Buy Sendai Utility

By Megumi Yamanaka and Michio Nakayama

Jan. 20 (Bloomberg) -- Tokyo Gas Co., Japan’s biggest distributor of the fuel, and its two partners abandoned a plan to buy a public gas utility in the northern Japanese city of Sendai.

Tokyo Gas, Tohoku Electric Power Co. and Japan Petroleum Exploration Co., or Japex, will announce their decision to Sendai authorities this afternoon and will brief media on their reasons at 3 p.m., Tohoku electric spokesman Kotaro Kudo and Tokyo Gas spokesman Naoyoshi Oogake said by telephone.

The three companies in September last year said they will bid jointly for Sendai Gas, which supplies more than 360,000 customers in six northern cities and towns. Tougher competition with electricity and other fuels has prompted Sendai to privatize its gas business through the sell off, to be carried out by April 2010. Sendai Gas posted losses for the 15th consecutive year in the period ended March 2006.

Sendai plans to select a buyer in March 2009. The only bidder so far is the group led by Tokyo Gas, the city said in October.

The Nikkei newspaper reported that Sendai and the bidders couldn’t agree on conditions including the price. Sendai sought more than 60 billion yen ($664 million) and demanded that it retain veto power over proposals put to shareholders, the newspaper said. The group’s bid was below 60 billion yen, the Nikkei said, without citing anyone.

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