TEPCO Fuel & Power, Inc., a wholly owned subsidiary of Tokyo Electric Power Company Holdings, Inc.(TEPCO Holdings), and Chubu Electric Power Co., have announced the conclusion of a basic joint-venture (JV) agreement with the aim of integrating existing fuel receiving, storage and gas transportation businesses and existing thermal power generation businesses in Japan into JERA Co., Inc. (JERA).
According to a statement, the two Japanese energy majors already have a “comprehensive alliance” covering the fuel and thermal power generation business. The conclusion of a basic agreement on integration of existing thermal power generation businesses aims to “build a new business model in response to changes in the business environment.
Based on a relationship that has “an equal and complementary spirit”, TEPCO Holdings, TEPCO Fuel & Power and Chubu Electric will engage in detailed study in the lead-up to the integration, and aim to conclude a joint-venture (JV) agreement concerning the integration in the first half of FY 2017. The TEPCO Group is also fully committed to the revitalization of Fukushima through the integration.
Background
Since JERA’s establishment in April 2015, TEPCO Fuel & Power and Chubu Electric have gradually integrated operations covering the entire supply chain, from fuel upstream and/or procurement through to power generation. Leveraging economies of scale to further develop business, integration effects are being realized in each business domain.
In addition to facing sluggish growth in domestic energy demand and growth of renewable energy use, the domestic energy market environment is expected to change dramatically with the creation of a new electricity transaction market and further liberalization of electricity retailing.
Together with responding flexibly to changes in the business environment, TEPCO Fuel & Power and Chubu Electric have agreed to commence detailed discussions concerning the integration in order to maximize the effects of the alliance.
JERA growth plans include renewable energy
The integration will see the completion of a series of value chains, from fuel upstream/procurement through to power generation and electricity/gas wholesaling.
The aim is not only to reorganize TEPCO Fuel & Power and Chubu Electric’s respective domestic thermal power generation businesses – through the achievement of a synergistic effect with the already integrated fuel and overseas power generation/energy infrastructure businesses, each business area will see growth accelerated and the entire value chain will be optimized.
Such business development, say the companies, will enable JERA to grow into a global energy company that can “compete on an equal footing with rivals” in the international energy market. Via a streamlining of domestic thermal power plants operation and an integrated/strategic “demolish and build” approach to power plants, the plan is to build “an optimized energy portfolio” that includes renewable energy.
In addition, active use of Internet of Things (IoT) technology and other external resources along with TEPCO Fuel & Power and Chubu Electric’s know-how and business foundations, JERA will also establish a globally-competitive Operation & Maintenance (“O&M”) services model in a bid to “improve the competitiveness of the domestic thermal power generation business and mitigate its environmental burden”.
