TOKYO: Japan's Tokyo Electric Power Co (Tepco) wants to use more short-term or spot fuel contracts to become more flexible and benefit from a plunge in energy prices, the company's president said. His comments followed Tepco's announcement last week that it and Chubu Electric Power Co may combine their fossil-fuel plants under a joint venture to be set up in April.
The venture would handle fuel procurement, investment in gas and other upstream developments, and some areas of power generation to lower costs.
"We need to be able to benefit from the lower (energy) prices by using more short-term and spot contracts.
We want to become more flexible," Tepco President Naomi Hirose told reporters on Saturday. The company is also seeking to reduce restrictions such as destination-clauses in the long-term contracts to gain more flexibility and expand trading activities, he said.
"It may be difficult to eliminate destination-clauses from the existing contracts, but we want our new contracts to be destination-free," Hirose said.
"The more, the better." Tepco and Chubu Electric, the dominant electricity suppliers in Japan's biggest and third-largest economic regions respectively, said last year that they have entered final talks on a joint venture in fossil fuel procurement and electricity generation.
Tepco, the world's second-biggest liquefied natural gas (LNG) buyer after Korea Gas Corp, currently buys about 25 million tonnes of LNG every year, while Chubu, the world's third-biggest LNG buyer, takes in around 14 million tonnes a year.
"As we plan to form a new company which buys about 40 million tonnes of (LNG) fuel a year, we are receiving more proposals and contacts on upstream stakes. This is a positive part of our alliance," Hirose said. Asked whether the falling oil prices affect its procurement strategy, Hirose said: "We can't change our strategy just because oil prices have dropped to $50.
We have to have a wide and long term view." Tepco plans to buy an annual 400,000 tonnes of LNG each from Mitsui & Co and Mitsubishi Corp from the Cameron LNG project in the United States for 20 years from 2017.
Tepco was saved from bankruptcy by the government in 2012 following reactor meltdowns at its Fukushima plant north of Tokyo after an earthquake and tsunami in March 2011.
The disaster led to the shutdown of all of Japan's nuclear reactors for stringent safety checks, forcing operators to import record amounts of coal and expensive LNG for power generation.
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