Japan’s JERA H1 profit halves, full year forecast unchanged

TOKYO : Japan’s top power generator, JERA, said on Tuesday its April-September net profit halved, hit by a steep drop in gains from lagged fuel price adjustments and its U.S. power generation business.
The utility stuck to its annual profit estimate of 200 billion yen ($1.3 billion), which included the impact of the shutdown of its Taketoyo coal-fired power plant following a fire on Jan. 31. No date has been set yet for restarting the plant.
JERA, an unlisted company jointly owned by Tokyo Electric Power and Chubu Electric Power, reported net profit of 138.9 billion yen for the six months through Sept. 30, down 52 per cent from the year-ago period.
The decline in profit reflected a sharp drop in so-called time-lag gains, which shrank to 16.6 billion yen in the first-half from 215.9 billion yen a year earlier. The gains stem from delays in reflecting fuel price changes in its power prices.
However, JERA, Japan’s biggest buyer of liquefied natural gas (LNG), said excluding the time-lag effects, its profit rose 62 per cent to 122.2 billion yen, due to improved competitiveness in procuring thermal coal and LNG.
“Last year, hedging against coal price fluctuations through derivatives backfired. But we’ve seen an improvement in the sector this year,” JERA’s executive officer, Naohiro Maekawa, told a press conference.
JERA, which meets around 80 per cent of its domestic LNG demand through term contracts, buys additional fuel from the spot market during peak demand season in summer and winter, while selling excess supply when demand is lower.
“The market situation and the ratio of our long-term contracts and spot transactions also helped improve the competitiveness of LNG procurement this year,” Maekawa said.
JERA’s independent power producer business in North America suffered some losses in mark-to-market values of derivatives positions, Maekawa said, adding that JERA considered that to be a temporary phenomenon.
($1 = 153.0300 yen)