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An Energy Coup for Japan: ‘Flammable Ice’

March 12, 2013 by Leave a Comment

TOKYO — Japan said Tuesday that it had extracted gas from offshore deposits of methane hydrate — sometimes called “flammable ice” — a breakthrough that officials and experts said could be a step toward tapping a promising but still little-understood energy source.

The gas, whose extraction from the undersea hydrate reservoir was thought to be a world first, could provide an alternative source of energy to known oil and gas reserves. That could be crucial especially for Japan, which is the world’s biggest importer of liquefied natural gas and is engaged in a public debate about whether to resume the country’s heavy reliance on nuclear power.

Experts estimate that the carbon found in gas hydrates worldwide totals at least twice the amount of carbon in all of the earth’s other fossil fuels, making it a potential game-changer for energy-poor countries like Japan. Researchers had previously successfully extracted gas from on-shore methane hydrate reservoirs, but not from beneath the seabed, where much of the world’s deposits are thought to lie.

The exact properties of undersea hydrates and how they might affect the environment are still poorly understood, however, as is the potential for making extraction commercially viable.

Japan has invested hundreds of millions of dollars since the early 2000s to explore offshore methane hydrate reserves in both the Pacific and the Sea of Japan. That task has become all the more pressing after the Fukushima Daiichi nuclear crisis, which has all but halted Japan’s nuclear energy program and caused a sharp increase in the country’s fossil fuel imports.

The Japanese Ministry of Economy, Trade and Industry said a team aboard the scientific drilling ship Chikyu had started a trial extraction of gas from a layer of methane hydrates about 300 meters, or 1,000 feet, below the seabed Tuesday morning. The ship has been drilling since January in an area of the Pacific about 1,000 meters deep and 80 kilometers, or 50 miles, south of the Atsumi Peninsula in central Japan.

With specialized equipment, the team drilled into and then lowered the pressure in the undersea methane hydrate reserve, causing the methane and ice to separate. It then piped the natural gas to the surface, the ministry said in a statement.

Hours later, a flare on the ship’s stern showed that gas was being produced, the ministry said.

“Japan could finally have an energy source to call its own,” said Takami Kawamoto, a spokesman for the Japan Oil, Gas Metals National Corp., or Jogmec, the state-run company leading the trial extraction.

The team will continue the trial extraction for about two weeks before analyzing how much gas has been produced, Jogmec said. Japan hopes to make the extraction technology commercially viable in about five years.

“This is the world’s first trial production of gas from oceanic methane hydrates, and I hope we will be able to confirm stable gas production,” Toshimitsu Motegi, the Japanese trade minister, said at a news conference in Tokyo. He acknowledged that the extraction process would still face technical hurdles and other problems.

Still, “shale gas was considered technologically difficult to extract but is now produced on a large scale,” he said. “By tackling these challenges one by one, we could soon start tapping the resources that surround Japan.”

Jogmec estimates that the surrounding area in the Nankai submarine trough holds at least 1.1 trillion cubic meters, or 39 trillion cubic feet, of methane hydrate, enough to meet 11 years’ worth of gas imports to Japan.

A separate, rough estimate by the National Institute of Advanced Industrial Science and Technology has put the total amount of methane hydrate in the waters surrounding Japan at more than 7 trillion cubic meters, or what researchers have long said is closer to 100 years’ worth of Japan’s natural gas needs.

“Now we know that extraction is possible,” said Mikio Satoh, a senior researcher in marine geology at the institute who was not involved in the Nankai trough expedition. “The next step is to see how far Japan can get costs down to make the technology economically viable.”

Methane hydrate is a sherbet-like substance that can form when methane gas is trapped in ice below the seabed or underground. Though it looks like ice, it burns when it is heated.

Experts say there are abundant deposits of gas hydrates in the seabed and in some Arctic regions. Japan, together with Canada, has already succeeded in extracting gas from methane hydrate trapped in permafrost soil. U.S. researchers are carrying out similar test projects on the North Slope of Alaska.

The difficulty had long been how to extract gas from the methane hydrate far below the seabed, where much of the deposits lie.

In onshore tests, Japanese researchers explored using hot water to warm the methane hydrate, and tried lowering pressure to free the methane molecules. Japan decided to use depressurization, partly because pumping warm water under the seabed would itself require a lot of energy.

“Gas hydrates have always been seen as a potentially vast energy source, but the question was, How do we extract gas from under the ocean?” said Ryo Matsumoto, a professor in geology at Meiji University in Tokyo who has led research into Japan’s hydrate deposits. “Now we’ve cleared one big hurdle.”

According to the U.S. Geological Survey, recent mapping off the North Carolina and South Carolina coasts shows large offshore accumulations of methane hydrates. Canada, China, Norway and the United States are also exploring hydrate deposits.

Scientists at the U.S.G.S. note, however, that there is still a limited understanding of how drilling for hydrates might affect the environment, particularly the possible release of methane, a greenhouse gas, into the atmosphere, and are calling for continued research and monitoring.

 

This article has been revised to reflect the following correction:

Correction: March 12, 2013

An earlier version of this article misspelled the surname of a spokesman for Jogmec. He is Takami Kawamoto, not Kawatomo.

Article source: http://www.nytimes.com/2013/03/13/business/global/japan-says-it-is-first-to-tap-methane-hydrate-deposit.html?partner=rss&emc=rss

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Japan’s Cleanup After a Nuclear Accident Is Denounced

January 7, 2013 by Leave a Comment

But much of the work at the Naraha-Minami Elementary School, about 12 miles away from the ravaged Fukushima Daiichi nuclear power plant, tells another story. For eight hours a day, construction workers blast buildings with water, cut grass and shovel dirt and foliage into big black plastic bags — which, with nowhere to go, dot Naraha’s landscape like funeral mounds.

More than a year and a half since the nuclear crisis, much of Japan’s post-Fukushima cleanup remains primitive, slapdash and bereft of the cleanup methods lauded by government scientists as effective in removing harmful radioactive cesium from the environment.

Local businesses that responded to a government call to research and develop decontamination methods have found themselves largely left out. American and other foreign companies with proven expertise in environmental remediation, invited to Japan in June to show off their technologies, have similarly found little scope to participate.

Recent reports in the local media of cleanup crews dumping contaminated soil and leaves into rivers has focused attention on the sloppiness of the cleanup.

“What’s happening on the ground is a disgrace,” said Masafumi Shiga, president of Shiga Toso, a refurbishing company based in Iwaki, Fukushima. The company developed a more effective and safer way to remove cesium from concrete without using water, which could repollute the environment. “We’ve been ready to help for ages, but they say they’ve got their own way of cleaning up,” he said.

Shiga Toso’s technology was tested and identified by government scientists as “fit to deploy immediately,” but it has been used only at two small locations, including a concrete drain at the Naraha-Minami school.

Instead, both the central and local governments have handed over much of the 1 trillion yen decontamination effort to Japan’s largest construction companies. The politically connected companies have little radiological cleanup expertise and critics say they have cut corners to employ primitive — even potentially hazardous — techniques.

The construction companies have the great advantage of available manpower. Here in Naraha, about 1,500 cleanup workers are deployed every day to power-spray buildings, scrape soil off fields, and remove fallen leaves and undergrowth from forests and mountains, according to an official at the Maeda Corporation, which is in charge of the cleanup.

That number, the official said, will soon rise to 2,000, a large deployment rarely seen on even large-sale projects like dams and bridges.

The construction companies suggest new technologies may work, but are not necessarily cost-effective.

“In such a big undertaking, cost-effectiveness becomes very important,” said Takeshi Nishikawa, an executive based in Fukushima for the Kashima Corporation, Japan’s largest construction company. The company is in charge of the cleanup in the city of Tamura, a part of which lies within the 12-mile exclusion zone. “We bring skills and expertise to the project,” Mr. Nishikawa said.

Kashima also built the reactor buildings for all six reactors at the Fukushima Daiichi plant, leading some critics to question why control of the cleanup effort has been left to companies with deep ties to the nuclear industry.

Also worrying, industry experts say, are cleanup methods used by the construction companies that create loose contamination that can become airborne or enter the water.

At many sites, contaminated runoff from cleanup projects is not fully recovered and is being released into the environment, multiple people involved in the decontamination work said.

Makiko Inoue contributed reporting from Tokyo.

Article source: http://www.nytimes.com/2013/01/08/business/japans-cleanup-after-a-nuclear-accident-is-denounced.html?partner=rss&emc=rss

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Toyota Cuts Profit Forecast by 54%

December 10, 2011 by Leave a Comment

Net income at Toyota, which analysts say is likely to lose its title as the world’s biggest automaker this year, is expected to fall 54 percent, to 180 billion yen ($2.3 billion) in the fiscal year that ends in March, the automaker said in a statement.

Global sales are likely to fall to 7.38 million vehicles, down from an earlier forecast of 7.6 million, Toyota said.

Those sales numbers are expected to put Toyota behind General Motors, which sold 7.48 million units last year and is on a big recovery push.

The lower profit projections, meanwhile, could put Toyota behind rivals closer to home. Nissan forecasts a 290 billion yen net profit this year, while analysts said that the South Korean automaker Hyundai could earn more than $6 billion this year, according to Bloomberg News. Toyota still produces more cars than any of its Asian rivals, however.

Toyota has been hit especially hard by Thailand’s worst flooding in decades, which has killed more than 600 people, damaged millions of homes and inundated hundreds of factories.

The disaster disrupted production at plants as far away as the United States, causing a net shortfall of 230,000 vehicles, Toyota said — almost four times the number at Nissan. Toyota says waters are now receding and most regions are back to normal output.

The flooding came just as Toyota and other Japanese manufacturers rebounded from the earthquake and tsunami that struck Japan in March, which severed supply chains and caused the company to suspend or reduce production at plants both in Japan and overseas.

A shortage of electricity after the nuclear disaster at Fukushima has also complicated efforts by Toyota to put production back on track.

Meanwhile, a stubbornly strong yen has weighed on Toyota’s bottom line by making production in Japan more costly and by eroding the value of its overseas profits. Toyota still makes more than half of its cars in high-cost Japan, a setup that analysts have warned hurts the automaker’s competitiveness.

Toyota, based in Toyota City, Japan, hopes that its new models will revive its fortunes. At the Tokyo Motor Show, which started last week, the automaker’s chief executive, Akio Toyoda, showed off a plug-in version of its popular Prius gas-electric hybrid vehicle.

Toyota shares, which have fallen 18 percent this year, dipped 0.4 percent in Tokyo before the forecast announcement.

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Japan Courts the Money in Nuclear Reactors, Selling Them Abroad

October 11, 2011 by Leave a Comment

Japanese industrial conglomerates, with the cooperation of the government in Tokyo, are renewing their pursuit of multibillion-dollar projects, particularly in smaller energy-hungry countries like Vietnam and Turkey. The effort comes despite criticism within Japan by environmental groups and opposition politicians.

It may seem a stretch for Japan to acclaim its nuclear technology overseas while struggling at home to contain the nuclear meltdowns that displaced more than 100,000 people. But Japan argues that its latest technology includes safeguards not present at the decades-old reactors at the stricken Fukushima Daiichi plant, which continues to leak radiation.

While Fukushima Daiichi could not withstand the magnitude 9 quake and the tsunami that ravaged much of Japan’s northeast coast in March, Japanese officials argue, their nation has learned valuable lessons — and has good nuclear track record withstanding most earlier earthquakes.

“Many countries of the world are seriously exploring the use of nuclear power, and we have assisted them in improving nuclear safety,” Japan’s new prime minister, Yoshihiko Noda, said at an address at the United Nations General Assembly recently. “We will continue to answer to the interest of those countries.”

Mr. Noda’s government considers foreign reactor projects a way to help stimulate Japan’s export-led economy, which had been struggling even before March’s natural and nuclear disasters. Tokyo’s backing— including financial assistance to the customer countries — has become critical in negotiating deals, especially as global confidence in nuclear safety has faltered in Fukushima’s wake.

The World Nuclear Association, a trade industry group, says the world’s stock of 443 nuclear reactors could more than double in the next 15 years, but analysts say that expansion will require strong support from the governments on both sides of any deal.

In early September, after a six-month hiatus following the earthquake, the Japanese government restarted talks with Vietnamese officials on a 1 trillion yen ($13 billion) project to build two reactors in southern Vietnam. The terms include possible Japanese financial aid.

The project would involve a new government-supported company whose largest shareholder is Tokyo Electric Power, operator of the damaged Fukushima Daiichi plant. The industrial conglomerates Toshiba and Hitachi, which supplied reactors to the Fukushima plant, are also investors. Ichiro Takekuro, a former executive of Tokyo Electric, is the president of the new company, called International Nuclear Energy Development of Japan.

The Vietnam project, if it proceeds, would join a roster of about two dozen other nuclear plant projects that Japanese makers are bidding or working on in countries including the United States, China, Turkey and Lithuania.

Japan’s nuclear drive is a contrast to the recent announcement by Siemens, Europe’s largest engineering conglomerate, that it would stop building nuclear power plants. Siemens, with headquarters in Munich, is responding to Germany’s decision this year to phase out nuclear power — largely in reaction to Japan’s calamity.

But makers of nuclear reactors from other countries, including Areva of France, General Electric of the United States, Russia’s state-owned Rostacom and several government-backed Chinese conglomerates like China National Nuclear, are pursuing new contracts. Within Japan, Tokyo’s effort has already drawn protest from nuclear opponents.

“The Japanese government’s promotion of nuclear exports is clearly a double standard and a mistake,” the environmental group Friends of the Earth Japan, said in September.

The opposition Liberal Democratic Party has also called for more debate on the nuclear export initiative by Mr. Noda and the ruling Democratic Party, although opinion in both parties remains divided.

“Some people are asking: Why is Japan trying to export something it rejected at home?” said Itsunori Onodera, a Liberal Democratic lawmaker and director of a parliamentary foreign policy panel charged with approving bilateral nuclear agreements. “Even if Japan ultimately does decide to continue nuclear exports, there needs to be more debate on the issue.”

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Siemens Abandoning Nuclear Power Business

September 19, 2011 by Leave a Comment

BERLIN — Siemens, the largest engineering conglomerate in Europe, announced Sunday that following the German government’s decision to phase out nuclear power by 2022, it would stop building nuclear power plants anywhere in the world.

“The chapter for us is closed,” Peter Löscher, the chief executive of the Munich-based conglomerate, said in an interview with Der Spiegel, the weekly news magazine. He emphasized the company’s commitment to the rapidly growing renewable energy sector.

He said the decision was also “an answer” to political and social opposition to nuclear power in Germany.

Siemens, which built all of Germany’s 17 nuclear power plants, is the first big company to announce such a shift in strategy. But other German companies involved in the nuclear energy industry are also reconsidering their options.

In May, Chancellor Angela Merkel said that the accident at the nuclear power station in Fukushima, Japan, had convinced her that Germany should look to other power sources. The decision represented a turnaround for Mrs. Merkel, who a year ago agreed to prolong the life of the country’s nuclear plants by an average of 12 years.

Nuclear power accounts for 23 percent of electricity production in Germany. The government is putting in place an ambitious plan to increase the share of electricity generated from renewable sources to 35 percent by 2020, up from around 18 percent now.

Mr. Löscher called the government’s plans for renewable energy “the project of the century.” Although the government’s goal has met with skepticism in some quarters, he said the 35 percent figure was “achievable.”

Mr. Löscher said the shift in strategy meant that Siemens would drop plans to cooperate with Rosatom, the Russian state-controlled nuclear power company that is planning to build dozens of nuclear plants throughout Russia over the coming two decades. Siemens might seek cooperation with Rosatom in other areas, Mr. Löscher said.

The Siemens decision does not amount to a boycott of the nuclear energy industry. A spokesman said the company would continue to make systems that could be used in nuclear power stations.

“We will provide conventional steam turbines that can be used for nuclear power plants and conventional power plants,” Alfons Benzinger, a spokesman for Siemens’s energy business, said Sunday.

The energy division is Siemens’s second-largest in terms of revenue. Last year, the conglomerate had total revenue of €76 billion, or $105 billion, and net income of €4.1 billion. Of that, the energy division contributed €3.6 billion.

Mr. Benzinger said the shift in strategy would not have a negative impact on the company’s overall sales.

Siemens, which has more than 400,000 employees worldwide, makes products as diverse as high-speed trains and sophisticated medical equipment. It is now one of the world’s largest providers of environmental technologies, which last year generated €28 billion of its total revenue.

Siemens said last year that its renewable energy unit — which is part of its environmental technologies division — had the strongest growth of any of its lines of business.

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A Safer Nuclear Crypt

July 6, 2011 by Leave a Comment

Yet this catch was far more menacing: 57,000 pounds of spent nuclear fuel at the LaSalle nuclear plant here, stored for decades in a pool and, if unshielded, powerful enough to deliver a lethal dose of radiation within seconds.

The fuel had just been moved into a capsule the size of a small silo, called a dry cask. Welded shut after it came out of the water, the cask was pumped full of inert gas, placed in an outer cask and moved outdoors to a concrete pad where it will sit until a disposal site is found. Spent fuel must be isolated from the environment for hundreds of thousands of years before it loses its potency.

The nuclear calamity at Japan’s Fukushima Daiichi plant has refocused attention on the vulnerability of spent fuel pools at the 104 operating American nuclear plants.

The pools are generally far more packed than the damaged ones at Fukushima. Some scientists argue that the crowding raises the risk of a fire and makes the pools a tempting target for terrorists.

Several members of Congress are calling for the fuel to be moved from the pools into dry casks at a faster clip, noting that the casks are thought to be capable of withstanding an earthquake or a plane crash, they have no moving parts and they require no electricity.

“We should not wait for an American meltdown to beef up American nuclear safety measures,” Representative Edward J. Markey of Massachusetts, who advocates greater reliance on casks, said after the accident in March in Japan. “We must heed the lessons to be learned from the nuclear meltdown in Japan and ensure nuclear safety here.”

But transferring the fuel to dry casks involves risks of its own, some industry experts say. “It’s a very complex discussion,” said Neil Wilmshurst, a nuclear power expert and a vice president of the Electric Power Research Institute, a nonprofit utility consortium. “Every time you move spent fuel, there’s always a risk of human error. How much of this do you want to do if you don’t need to do it?”

The discussion is unfolding amid a far broader and more divisive debate over nuclear waste disposal. A half-century after the American nuclear industry was born, the nation still lacks a dedicated repository for such waste because of maneuvering driven by not-in-my-backyard politics.

In 1987 Congress designated Yucca Mountain, a desolate volcanic ridge in the Nevada desert, as a national disposal site, ruling out sites in Texas and Washington State. But the political landscape shifted, and the Obama administration canceled the project in 2009 under pressure from Senator Harry Reid of Nevada, leader of the Senate’s Democratic majority.

Then came the earthquake and tsunami at Fukushima, which cut off power to four reactors and caused three cores to melt. The melting fuel in the reactors released hydrogen gas that then exploded, throwing debris into the fuel pools, destroying a barrier that had prevented the release of radioactive materials to the outdoors and leaving the pools exposed to the rain.

Suddenly, the Nuclear Regulatory Commission was under pressure to explain whether crowded American pools faced parallel risks.

Gregory B. Jaczko, chairman of the commission and a former aide to Senator Reid, contends that both fuel pools and dry cask storage are relatively safe, with any differences being fractional. “It’s like the difference between buying one ticket in the Powerball lottery and 10 tickets,” he said in an interview, referring to the odds that something will go wrong.

But Robert Alvarez, a former senior adviser to the secretary of energy and expert on nuclear power, points out that unlike the fuel pools, dry casks survived the tsunami at Fukushima unscathed. “They don’t get much attention because they didn’t fail,” he said.

In addition to the United States and Japan, plenty of other countries make extensive use of casks, usually storing them at reactor sites. Germany has gone a step further, placing them in installations designed to protect the casks from airplane crashes.

After Japan’s disaster, the Tennessee Valley Authority said it would study the possibility of moving more fuel to casks, but so far other American operators have not followed suit. Moving all of the nation’s fuel once it has cooled in the pools for at least five years could cost $7 billion, Mr. Alvarez said.

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Tepco Quells Push by Shareholders to End Nuclear Program

June 29, 2011 by Leave a Comment

The management of the operating company, Tokyo Electric Power, or Tepco, as it is known, also pushed through the appointment of 17 board members, including the reappointment of its 71-year-old chairman, raising questions about the extent of the overhaul that the company promised after the nuclear disaster.

“I apologize from the bottom of my heart for the trouble and fear that we have brought to our shareholders, and to society,” the chairman, Tsunehisa Katsumata, said at the shareholders’ meeting at a tightly guarded Tokyo hotel.

“We will do our utmost to bring the accident to a resolution and to work toward our mission of providing a stable source of electricity,” he said.

Some investors refused to be placated. “Go jump into a reactor and die!” one elderly man shouted at the row of executives, before being escorted out by attendants.

At one point, when Mr. Katsumata tried to wrap up a question-and-answer session, angry shareholders rushed toward the stage. The session continued.

With her voice shaking, a woman told board members that they were unfit to lead the company. She said the company had ignored warnings about the dangers of nuclear power. “Shame on you!” she cried. “You should all be sacked.”

Tokyo Electric has been fighting for its survival since the March 11 quake and tsunami ravaged the Fukushima Daiichi nuclear power plant, about 140 miles north of Tokyo, leading to hydrogen explosions and releases of radioactive material in the worst nuclear accident since the Chernobyl disaster in Ukraine in 1986.

At least 80,000 people in northeastern Japan have fled their homes, and farmers and fishermen in the area have had to abandon their livelihoods. Factories within a 20-kilometer evacuation zone have had to move or close.

Tokyo Electric could face as much as 11 trillion yen, or $136 billion, in compensation claims, analysts have estimated. The cost of dismantling the Fukushima Daiichi plant could reach an additional 20 trillion yen, according to the Japan Center for Economic Research.

The dismal forecasts have cast a dark cloud on the financial health of Japan’s largest utility, a company with strong links to government that has dominated the country’s power industry for decades. Last week, Moody’s cut Tokyo Electric’s credit rating to junk status, after a similar move by Standard Poor’s last month. Tokyo Electric shares have plunged more than 80 percent since the earthquake.

Prime Minister Naoto Kan has said that the government should provide a safety net for Tokyo Electric, to keep the company afloat while it pays damage claims. Japan is considering setting aside about 230 billion yen from a planned 2 trillion yen supplementary budget to help Tokyo Electric, according to Bloomberg News.

Mr. Kan has been eager to hold Tokyo Electric accountable and to avoid having to dip into public money. But he also wants the company to avoid bankruptcy, which would bring chaos to the stock and credit markets.

The company had about 933,000 shareholders at the end of March. At that time, financial institutions held about 30 percent of Tokyo Electric shares, while other corporations had 5 percent. Individual investors held about 44 percent, while overseas investors held 17 percent.

Nevertheless, many analysts have underscored the need for change at Tokyo Electric. “A fundamental structural overhaul is needed at the board level to enable Tepco to rebuild its reputation and recover financially,” Glass Lewis, a United States company that advises institutional investors, said in a report before the shareholder meeting.

Individual investors at the meeting on Tuesday aired similar demands.

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After Nuclear Crisis, Japan’s Biggest Utility Faces Insolvency Risk

June 10, 2011 by Leave a Comment

On Thursday, shares in Tokyo Electric again fell to a record low, at one point slumping to 148 yen ($1.85), down 93 percent from prequake levels. Shares finished at 192 yen ($2.40), down 4 percent from the previous day, and the company already had a 1.25 trillion yen loss in the year ending March 31, the largest annual loss for a nonfinancial institution in Japanese history.

The physical damage from the accident at the Fukushima Daiichi nuclear power plant has been so widespread that even conservative estimates of compensation claims amount to tens of billions of dollars — a burden that could render Japan’s largest utility insolvent.

In the early days of the disaster, even while hydrogen explosions continued to rock the nuclear plant, the collapse of Tokyo Electric was thought highly unlikely. Despite the catastrophe, analysts said, the government would not allow the failure of Tokyo’s sole electricity supplier. Because the effect of such a collapse on credit and stock markets would be catastrophic, they said, surely the government would cap compensation claims, or step in to provide other support.

And banks were so certain of this that they agreed, in early April, to lend almost 2 trillion yen ($25 billion) to the struggling utility company. In the eyes of the market, Tokyo Electric was too big to fail.

Now, three months later, the market is not so sure.

“Investors used to think, ‘This is a utility. What’s the government going to do, let it fail and let Tokyo go without power?’ ” said Yasuhide Yajima, the senior economist at the NLI Research Institute, an arm of Nippon Life Insurance. “But now their confidence is completely shaken,” he said. “They’re racing to offload their holdings before the share price hits zero.”

One cause for concern, analysts say, is the inability of a gridlocked government to complete a financial rescue plan for Tokyo Electric. To appease public anger over the disaster, the government has vowed to hold Tokyo Electric fully liable for the compensation claims that are likely to roll in from farmers, fishermen and others whose livelihoods have been disrupted in the crisis.

A government plan drawn up last month places no limit on the company’s liabilities, even though Japanese law would allow for such a cap following natural disasters. But the plan, which must still be approved by a divided Parliament, also calls for a fund that would use taxpayer money to help Tokyo Electric compensate victims and continue to provide Tokyo with power, while avoiding insolvency. Under the plan, the company will eventually pay back the fund in full.

The problem, analysts say, is that it is virtually impossible to know how large those claims could eventually be — and whether the government would have the means and commitment to cover them.

In a recent estimate, Shigeki Matsumoto, an analyst at Nomura Securities, predicted the total would come to around 5 trillion yen ($64 billion), including 3.2 trillion to 3.3 trillion yen ($40 billion to $41.2 billion) in payout to farmers and fishermen — two years’ worth of agricultural and fisheries output in the plant’s vicinity. Nomura also projected 0.6 trillion yen in compensation to displaced families.

A Bank of America-Merrill Lynch estimate puts the sum as high as $130 billion. (By comparison: BP’s compensation fund for the Gulf of Mexico oil spill is $20 billion. )

“Estimating damages at this point,” Mr. Matsumoto said, “is difficult.”

Amid these uncertainties, Japan has resisted offering a blanket promise to back Tokyo Electric’s compensation payouts.

Article source: http://www.nytimes.com/2011/06/10/business/global/10tepco.html?partner=rss&emc=rss

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S.&P. Cuts Rating of Tokyo Electric Power to Junk

May 30, 2011 by Leave a Comment

S.P. said it had lowered the long-term credit rating of Tokyo Electric, one of the most active bond issuers in Japan, to B+ from BBB, while cutting the rating on the utility’s secured bonds to BB+ from BBB.

The ratings agency said it viewed a default on the utility’s 5 trillion yen ($62 billion) in corporate bonds as less likely than a restructuring of its bank debt.

Japan’s government earlier this month agreed to set up a fund with taxpayer money to help Tokyo Electric, known as Tepco, avoid insolvency and compensate victims of the radiation crisis at its Fukushima Daiichi nuclear plant.

Reactor cooling systems were knocked out by the March 11 earthquake and tsunami, causing a meltdown at three of the reactors and forcing the evacuation of about 80,000 residents near the plant.

But Chief Cabinet Secretary Yukio Edano has said the government scheme, which still needs parliamentary approval, would be unlikely to gain public support unless Tepco’s banks agreed to waive some of the debt they are owed by the utility, a step they have resisted.

S.P. said a restructuring of Tepco’s bank debt would be a “selective default,” and it now regarded the probability of “extraordinary” Japanese government support for Tepco as “high” rather than “very high,” the phrase it had previously used.

“Standard Poor’s now believes that some politicians think banks should share the burden in some form, which may fall into our definition of default,” S.P. said in a statement. “We now think such a scenario is more likely than previously thought.”

Tepco is Japan’s largest corporate bond issuer, and its shares are widely held by financial institutions.

S.P. said it was still unclear how much Tepco would have to pay in compensation for people who have suffered damages because of the Fukushima disaster. But the ratings agency said it believed that the Japanese government would intervene to prevent a disruptive default on Tepco’s bonds.

“The Japanese bond market would suffer a negative impact if Tepco were to default on its bond payments,” the ratings agency said. “We believe the Japanese government has an economic incentive to avoid such a scenario.”

Moody’s Investors Service said on May 19 it might review Tepco’s credit ratings if Japan failed to pass laws to help the utility handle compensation payments related to the plant.

Estimates for the cost of the compensation to be paid to displaced residents and disrupted business ranged as high as $130 billion in an extended crisis, according to one calculation by Bank of America-Merrill Lynch.

By comparison, BP earmarked just $20 billion for its oil-spill clean-up fund run by an overseer appointed by the Obama administration.

Sumitomo Mitsui Financial Group is the main bank for Tepco, Japan’s largest and most politically connected utility.

SMBC had an estimated $11 billion in exposure to Tepco after an April lending round, according to CreditSights. The analysis service put the total for Mizuho Corp. at the equivalent of $8.5 billion, and at $5.8 billion for Bank of Tokyo-Mitsubishi.

(Reporting by Chisa Fujioka, Kevin Krolicki; Editing by Michael Watson and Will Waterman)

Article source: http://www.nytimes.com/reuters/2011/05/30/business/business-us-tepco-credit.html?partner=rss&emc=rss

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Regulators Find Design Flaws in New Reactors

May 21, 2011 by Leave a Comment

The chairman, Gregory B. Jaczko, said that computations submitted by Westinghouse, the manufacturer of the new AP1000 reactor, about the building’s design appeared to be wrong and “had led to more questions.” He said the company had not used a range of possible temperatures for calculating potential seismic stresses on the shield building in the event of an earthquake, for example.

Mr. Jaczko said the commission was asking Westinghouse not only to fix its calculations but also to explain why it submitted flawed information in the first place. Earlier this year the commission staff said it needed additional calculations from Westinghouse to confirm the strength of the AP1000’s shield building. The building has not been built; the analysis of its strength and safety is all computer based.

The announcement comes as the commission and the American nuclear industry are facing increased scrutiny as a result of the calamity that began after an earthquake and tsunami damaged the Fukushima Daiichi nuclear plant in Japan in March, leading to releases of radioactive material. Various critics have asked the commission to suspend licensing of new plants, the relicensing of old ones and various other activities until the implications of the Fukushima accident are clearer.

While the commission has said it will evaluate the Japanese accident methodically, it had previously said it did not anticipate that this would cause a delay in approving the AP1000. Now, however, it appears far warier that it will finish this summer.

Westinghouse countered in a statement that the “confirmatory items” that the commission was asking for were not “safety significant.” It noted, and the commission agreed, that the company had been the first to identify some of the problems itself. Still, the commission seems to have taken a slightly darker view.

The Southern Company has already dug the foundations and done other preliminary work for two of the AP1000 reactors adjacent to its existing reactors at Plant Vogtle near Augusta, Ga. The Energy Department has promised loan guarantees for that project provided that the Nuclear Regulatory Commission approves the design.

South Carolina Electric and Gas has broken ground for another two, 20 miles northwest of Columbia.

The commission had previously said it expected to approve the AP1000 design this summer. But on Friday a spokesman for the commission, Scott Burnell, said the decision would be delayed for a period of time that he could not specify until Westinghouse submitted a third round of revised calculations.

“They need to be doing the work correctly and completely, and we need to have confidence that that’s what they’re doing,” said one commission official, who said he was not authorized to be quoted by name. “They have additional work they need to do, and a short time to complete it if it’s not going to have a significant impact on their schedule.”

Southern had been expecting to receive a license to construct and operate the new plant by the end of this year and to have the first reactor on line by mid-2016. On Friday, the company said it still planned to proceed. “We have confidence the AP1000 technology,” a company spokesman, Todd Terrell, said.

In addition to the plants in Georgia and South Carolina, ground has also been broken on four AP1000 reactors in China, two at Sanmen and two at Haiyang. Westinghouse, which is owned by Toshiba, is making parts for the Chinese units in factories in the Pittsburgh area.

The AP1000 was in principle designed so it would be faster to build and safer to run than previous models. The letters stand for “advanced passive,” with many of its safety features depending on natural forces like gravity and convective cooling rather than pumps and valves, which could be knocked out by electrical failures or floods as they were at Fukushima.

Article source: http://www.nytimes.com/2011/05/21/business/energy-environment/21nuke.html?partner=rss&emc=rss

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