Key Point of President's Regular Press Conference
September 2014 Regular Press Conference : President Mizuno's Message
October 07, 2014
Chubu Electric Power Co.,Inc.
- I would like to speak mainly about the background on applying for this comprehensive alliance, and the summary and effect of this matter.
TEPCO and Chubu Electric to form comprehensive alliance
Not only is this Alliance effective in ensuring national interest through supplying energy on an internationally competitive basis, it has been deemed to be effective in realizing two growth strategies that were previously set forth in Chubu Electric Power’s “Management Vision 2030,” including the “Expansion of the domestic energy business area and scale” and the “Active overseas business deployment,” and was thus proposed in May of this year.
(Basic Agreement Facts and Details)
Afterwards, as a result of negotiations held between both companies, our company was chosen as the party to negotiate preferentially with TEPCO, leading to a conclusion of the Basic Agreement.
Under this Basic Agreement, it was promised that both companies will hold exclusive bargaining rights for negotiations, and have also agreed upon future detailed negotiation prerequisites.
(Basic Philosophy of the Comprehensive Alliance)
Prior to concluding this Basic Agreement, both companies held negotiations regarding the "Vision" in light of the current and future energy business environment, and shared "Three Philosophies" that will become the foundation of the Alliance between the top level managers from both companies.
The first philosophy is providing customers with a stable supply of energy on an internationally competitive basis, by establishing a global energy company with a strong competitive position in international energy markets; and increasing the enterprise value of both Tokyo Electric Power Company Group and Chubu Electric Power Company Group through a relationship that is equal and complementary.
The second is the establishment of a new energy company business model combining the highest level of management resources regarding both companies; ensuring that the Joint Venture has a self-sufficient business culture, as well as strong and sound management and financial strength that are trusted in the global market; and providing the Joint Venture a corporate structure enabling independent business management and swift decision-making.
The third philosophy is optimizing the performance of the entire business by strengthening the supply chain as a whole, from upstream fuel investment and fuel procurement through power generation.
Chubu Electric Power and TEPCO will continue further detailed negotiations with the aim of realizing these three philosophies.
(Summary and Effect of the Comprehensive Alliance)
Next, I would like to give an overview of this Alliance and its effects.
The Alliance will be implemented starting with area that will have a high impact and are easier to undertake. Areas of which the companies are to negotiate include fuel procurement and related business operations, including upstream fuel investments, fuel transportation, and trading, as well as new thermal power plant construction and thermal power plant replacement. Negotiations will also be held regarding overseas power generation and gas wholesale operations.
For results of the Alliance related to fuel procurement of both companies, underpinned by the world's largest LNG procurement scale of approximately 40 million tons annually, a fuel procurement portfolio that is outstanding in terms of economy, stability and flexibility will be established. Also, it is thought that by jointly conducting the upstream fuel investments, fuel transportation, and trading businesses that the companies previously operated individually, large-scale and efficient expansion will become possible.
Combining the power of both companies to replace old and energy-inefficient thermal power plants with the latest high-efficiency power generation facilities will contribute to a stable supply of power and large reduction of fuel consumption.
In addition, rather than performing these efforts separately, by integrating the operation for the reception and storage equipment, the resiliency of fuel reception will be expanded. We are also aiming to make further improvements in operational efficiency through the integration and optimization of the entire supply chain, from upstream fuel investment to power generation in Japan and overseas.
Through these efforts, we intend to create a "true global energy company" capable of competing neck and neck with other players in international energy markets.
Furthermore, after ascertaining the impact of this Alliance, we will continuously consider more sophisticated and extensive Alliances step by step.
(Basic Concepts of Future Detailed Negotiations)
Continuing on, I would like to speak about the prerequisites of future detailed negotiations.
First off, the acceptance of equal rights and equal benefits, based on an equal and complementary spirit, shall be standard for this Alliance. Specifically, a 50:50 ratio for both voting rights and investments toward the Joint Venture shall be standard.
Secondly, negotiations will be conducted on the premise that both parties are appropriately responsible to their shareholders.
This Alliance is merely a strategic alliance between private companies. For this reason, business entities to be established through this Alliance shall be based on the consistencies with philosophies and strategies of the private sector, and will be managed under a corporate structure enabling independent business management and swift decision making.
Thirdly, the Joint Venture established through this Alliance is to be market accredited entity with strong and sound management and financial strength. Reparation debts, etc., attributable to the accident at Fukushima Daiichi Nuclear Power Station will be borne by TEPCO based on relevant laws and regulations.
Note that, through cost reductions and the increased enterprise value and dividends of the Joint Venture due to the success of this Alliance, TEPCO will work towards fulfilling its responsibility for the Fukushima nuclear accident.
Based on the above, we will move forward with detailed negotiations aimed at the establishment of the Alliance business entity to realize the goals of this Alliance and entering into a final agreement regarding this Alliance in the second half of FY2014.