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Announcement:

Moody's: Restart of two nuclear reports in Japan encouraging

Global Credit Research - 18 Jun 2012

Tokyo, June 18, 2012 -- Moody's Japan K.K. says that the decision by the Japanese government to restart two nuclear reactors owned by Kansai Electric Power Company, Incorporated (KEPCO, A3 negative) is supportive of the financial profile of the utilities sector in Japan, but many uncertainties remain.

Moody's considers the decision indicates that the authorities are beginning to develop a new long-term -- although still emerging -- approach to regulating the power industry in Japan, following the problems encountered after the 11 March 2011 earthquake.

Moody's recent ratings action on seven nuclear dependent Japanese electric utilities was partially driven by the uncertainties in the regulatory environment. The decision to restart the two reactors, although very limited in itself, is an indication of an emerging consensus, at least for the short term.

The restart of the country's nuclear power stations is important to returning the industry to profitability.

The shutdown of all nuclear plants in Japan after the accident at the Fukushima Daiichi nuclear power station owned by Tokyo Electric Power Company Inc. resulted in financial losses at almost all nuclear-dependent utilities in FYE 3/2012.

On June 16, 2012, Prime Minister Yoshihiko Noda decided the restart of the Oi No.3 and No.4 nuclear reactors owned by KEPCO. The decision reflects the government's recognition that without nuclear power generation, KEPCO's customer area, including Central Osaka -- the second largest business district in Japan -- would suffer energy shortages equal to about 15% of demand during the peak summer season.

Such shortages could lead to significant social and economic difficulties.

Moody's believes that the most significant reason for the continued low profitability of the utilities is the delay in the decision regarding whether and how many nuclear plants should be restarted or not.

Without the government's clear direction on which nuclear plants will be restarted, utilities still do not have a clear view of their future energy mix and cost structure. Consequently they are delaying their applications for new tariffs.

However, Moody's does not view this recent decision as sufficient to restore KEPCO's profitability, or leading to changes in the rating outlook for KEPCO or other utilities now assigned negative outlooks.

First, it is unclear how long Oi No. 3 and No. 4 will be allowed to operate. If the reactors are taken offline after the peak season, their contribution to KEPCO's overall profitability would be limited.

Second, the restart of the Oi reactors could be an exception as shortages in KEPCO's region are seen as the largest in Japan. Other utilities are not able to claim such exceptions.

Third, the overall costs for operating nuclear plants in the environment after the March 11 earthquake while unclear is expected to increase substantially. New regulations, as yet only emerging, are expected to result in additional and expensive safety-related changes. These may include new safety equipment and longer shut-downs for maintenance. Such changes could substantially erode or even eliminate the economic benefits of nuclear power.

Moody's will continue monitoring the political decisions on restarting other nuclear plants, and on new regulatory framework.

Kazusada Hirose
VP - Senior Credit Officer
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Richard Bittenbender
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's: Restart of two nuclear reports in Japan encouraging
No Related Data.

Copyright 2013 Moody's Japan K.K., Moody’s SF Japan K.K. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.


CREDIT RATINGS ARE MOODY'S JAPAN K. K.'S ("MJKK") CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MJKK DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MJKK ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.


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MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of Moody’s Corporation(MCO). MJKK is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 2.


MJKK hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK have, prior to assignment of any rating, agreed to pay to MJKK for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MCO and MJKK also maintain policies and procedures to address the independence of MJKK's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MJKK and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."


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This credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.

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