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Japanese power-company stocks that rallied after the pro-nuclear Liberal Democratic Party was elected may struggle to sustain gains because of public opposition to restarting atomic plants.
The Topix Electric Power & Gas Index (TPELEC) fell 1.8 percent today after surging 9.2 percent yesterday, with Kansai Electric Power Co. (9503) sliding 4.5 percent. Tokyo Electric Power Co. (9501), the most punished in the stock market after the Fukushima disaster last year, gained 17 percent, the only nuclear utility to rise.
Uranium stocks rose, including a 33 percent increase in Australia’s Bannerman Resources Ltd. (BMN) today. The LDP has said Japan needs its 50-reactor fleet working to reduce costs of importing fuel for gas- and coal-fired plants.
“Just because politicians say they want to restart reactors doesn’t mean they will actually be able to do it,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, which has about $400 billion in assets. “It’ll be hard to maintain these stock gains,” she said.
Any reactor restart will need approval from the Nuclear Regulation Authority, which is investigating six atomic plants on concern they were built on active fault lines. Japanese law states reactors cannot be built on active faults, indicating the plants may be decommissioned.
“Proving safety is going to be really hard,” Sera said.
Regulators earlier this month said Japan Atomic Power Co.’s Tsuruga plant may be on an active fault. The extra yield investors demand to own the utility’s 1.422 percent notes due December 2019 over government debt jumped 500 basis points to a record 900 basis points last week, according to JS Price. The spread on similar-maturity 1.405 percent notes sold by Kansai Electric, the second-biggest stakeholder in Japan Atomic, climbed 35 to 175 basis points on Dec. 13, the highest ever, the data show.
The meltdowns at Tokyo Electric Power reactors and ensuing radioactive contamination led nations from China to France and Switzerland to review atomic policies, including the phase-out ordered by German Chancellor Angela Merkel. Countries including Britain affirmed plans to rely more on atomic power.
The likelihood of backpedaling on nuclear power in central Europe is even slimmer than in Japan, “for the simple reason that Japan’s energy crunch without nuclear is far greater than in countries like Germany or Switzerland,” Mark Hibbs, senior associate at the Carnegie Endowment nuclear policy program in Berlin, said.
Andreas Loeschel, an adviser to Germany’s government on monitoring its energy transformation, said in a telephone interview that there’s unlikely to be an impact on the country.
“The energy shift in Germany has such a momentum that it is not influenced by a change of government in Japan,” said Loeschel, a professor who heads environmental and resource economics at the Centre for European Economic Research ZEW in Mannheim.
Japan’s LDP, led by former Prime Minister Shinzo Abe, took 294 seats in the 480-member lower house of parliament, public broadcaster NHK said yesterday. The party governed for all but 10 months since 1955 and oversaw Japan’s development of atomic energy. It was ousted in 2009, two years before an earthquake and tsunami crippled the Fukushima Dai-Ichi nuclear plant, releasing radiation and forcing the evacuation of 160,000 people.
“People who voted for the LDP are supporting their economic-stimulus measures, not nuclear power policy,” said Toshihiro Inoue, a member of the “Goodbye Nuclear: the Action of 10 Million” civil movement, whose online petition to stop atomic reactors in Japan has so far received about 8.2 million signatures.
The LDP promised during the election campaign to push for a 2 percent inflation target from the Bank of Japan (8301), compared with 1 percent now, and “unlimited” monetary easing. That stance has weakened the yen to a near 20-month low, a boost to export- based manufacturers. A weak yen also pushes up the cost of procuring gas and coal, among other raw materials.
Tens of thousands of nuclear power opponents held weekly protests outside outgoing Prime Minister Yoshihiko Noda’s official residence this year. A government-backed public forum found in August that 47 percent of participants favored cutting nuclear power to zero, while newspaper polls in the last 18 months showed support for ending atomic power in Japan.
All but two of Japan’s 50 nuclear reactors are idled due to public safety concerns. Noda’s Democratic Party of Japan said it would phase out nuclear power by the end of the 2030s after the repeated mass public rallies.
In contrast, LDP General Council Chairman Hiroyuki Hosoda said on Nov. 27 that Japan must restart reactors quickly because of the high prices for gas, coal and oil used to fire thermal power plants.
The rally by utilities “is fairly reflective of the market’s expectation for reactor restarts,” Edward Sterck, an analyst at BMO Capital Markets in London, said today by phone. “It reduces the likelihood of further uranium price declines.”
Under current rules set up by the DPJ, four cabinet members, including the prime minister and the energy minister, need to give approval in addition to nuclear watchdog clearance for a Japanese nuclear reactor to restart. Kansai Electric restarted two units at the Ohi station in July, the only approvals since the Fukushima disaster.
While the four cabinet members can permit a restart by itself, the approval of prefectural and municipal authorities is traditionally sought. It takes several days for a reactor to be brought back online after a shutdown.
The change of ruling party should mark an alteration in nuclear policy, according to Kansai Electric’s Chief Executive Officer Makoto Yagi.
The Federation of Electric Power Companies, which includes Japan’s dominant nine regional utilities that own atomic plants, would like the new government to revise the nuclear energy policy of the previous administration, Yagi, who is also the chairman of the federation, said yesterday in a statement.
Kansai Electric relied on nuclear for almost half its generated power in the year before the 2011 disaster. It reported a record first-half loss of 117 billion yen ($1.4 billion) after the shutdown of reactors forced the utility to import fuels for gas-, oil- and coal-fired plants.
Tepco, which was trading at 2,121 yen before the tsunami struck its plant last year, has gained 56 percent this week, to close at 237 yen today.
Kansai Electric, which had its biggest jump since at least Sept. 11, 1974 yesterday, dropped 4.46 percent to 879 yen. Tohoku Electric Power Co. (9506) slipped 6.9 percent to 798 yen after climbing 15 percent yesterday.
The Metropolitan Coalition Against Nukes, another civil movement, said on its website it will protest the restart of nuclear reactors outside the prime minister’s official residence on Dec. 21.
“Even for the LDP it will be difficult to gain support from residents living near nuclear stations for restarting them, as the tragedy in Fukushima is not over,” Inoue at Goodbye Nuclear said.
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