TEPCO and Chubu Electric sign JVA

Tokyo Electric Power Company Inc. (TEPCO) has entered into a Joint Venture Agreement (JVA) with Chubu Electric Power Co. Inc.

The JVA will result in the formation of a comprehensive alliance covering the entire energy supply chain, from upstream investments and fuel procurement through power generation.

TEPCO and Chubu Electric have agreed to jointly establish a new company (NEWCO) in April 205, which will implement the development of upstream investments, fuel procurement, fuel transportation, fuel trading businesses, development of new domestic thermal power plants and scrap and build of aged domestic thermal power plants, as well as the development of new power plants overseas.

On 7 October 2014, TEPCO and Chubu Electric signed a memorandum of understanding (MoU) on the alliance and subsequently have been negotiating the terms and conditions for its realisation. During the negotiations, TEPCO and Chubu Electric have come to a shared recognition of the fundamental principles and strategies of the alliance businesses and have concluded that the alliance can achieve both the secure and stable supply of energy on an internationally competitive basis and also increase the corporate values of both TEPCO and Chubu Electric.

TEPCO and Chubu Electric will invest in NEWCO on a 50:50 basis.

Establishment of NEWCO

NEWCO will be established in a step-by-step manner following an agreed roadmap, starting with areas that will have a high impact and are easier to undertake. From April 2015, NEWCO will commence operations and will focus on the development of new energy upstream investments, the integration of the process for new fuel procurement, and the formation of processes to develop new thermal power plants and implement scrap and build of aged thermal power plants both domestically in Japan and internationally.

By September 2015, the companies will integrate their existing fuel transportation and fuel trading businesses into NEWCO, taking into account the progress of consultation with relevant stakeholders.

By the end of December 2015, TEPCO and Chubu Electric will execute a further agreement to integrate into NEWCO their existing fuel businesses, including upstream assets, fuel sale and purchase agreements, and energy infrastructure businesses.

This integration is expected to be completed in the summer of 2016, following due consideration of the achievements of NEWCO in the interim and also taking into account the progress of the planned introduction of a holding company structure within TEPCO. With integration achieved, NEWCO will expand its business domain, enlarge the scale of the businesses and optimise its entire supply chain.

In addition, TEPCO and Chubu Electric will continue to discuss the integration of their existing domestic power stations and related assets into NEWCO, giving due consideration to the achievements of NEWCO, and TEPCO's progress in implementing management reforms.

Adapted from press release by Callum O'Reilly

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