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Japanese utilities Chubu, Tepco integrate global coal buying under new JV

Two of Japan's largest electricity generators Chubu Electric and Tokyo Electric Power or Tepco are in the process of combining their purchasing activities for thermal coal and other fuels as part of a joint venture entered into in April, market sources said Thursday.

Traders said the two utilities were expected to have fully integrated their fuel transportation and trading businesses under the JV by October 1.

"Tepco and Chubu will be forming a joint venture called JERA from October 1 and all thermal coal procurement will be done by JERA. Most of its staff are ex-Chubu Electric Trading people located in Singapore," a market source said.

Chubu Electric has been in a joint venture for its fuel buying with European energy trading company EDF Trading since 2008.

That joint venture, Chubu Energy Trading, took over the exclusive mandate for Chubu's coal buying and freight logistics when it moved to Singapore in April 2012.

Chubu Electric's Hekinan coal-fired power station in Japan is one of the country's largest at 4,100 MW of generating capacity and consumes about 10 million mt/year of imported thermal coal.

Tepco's coal-fired power plants in Japan had a consumption rate of 7.5 million mt/year in the fiscal year ended March, according to the company's website.

The integration of Chubu Electric and Tepco's purchasing activities for imported thermal coal and logistics chains could have implications for the periodic negotiations the companies have with their Australian thermal coal suppliers, which include Glencore and Rio Tinto.

A united Chubu Electric and Tepco purchasing unit could have considerable clout in dealing with suppliers over prices in annual supply contracts, which are reset on April 1 each year.

The Tokyo-based JERA Co. joint venture was formed in April as a 50:50 partnership with the aim of streamlining Chubu Electric and Tepco's global fuel supply chains, which stretch from upstream investments in coal mines through to coal buying and the construction of new power plants in Japan.

In a notice on its website, JERA said it expects to increase efficiency and secure stable supplies on a competitive basis by integrating the two companies' global supply chains and drawing on their knowledge bases.

Its next step was to integrate the fuel businesses of the two companies, including upstream assets, receipt and storage facilities and energy infrastructure, by mid-2016, it added.

source: http://www.platts.com