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By Taiga Uranaka and James Topham
TOKYO (Reuters) - Kyushu Electric Power Co has become Japan's second nuclear generator to seek state support this week as reactors across the country remain idled and industry losses stack up three years after the Fukushima disaster.
Kyushu Electric, a regional monopoly that supplies power in southern Japan, said on Wednesday it was in talks with state-owned Development Bank of Japan (DBJ) for financial backing. On Tuesday, Hokkaido Electric Power Co, which supplies Japan's northernmost island, also asked the same bank for financial assistance, a source said.
All of Japan's 48 nuclear reactors have been shut down, pending stringent safety checks, since an earthquake and tsunami knocked out the Fukushima nuclear complex in March 2011.
The country's nine publicly traded nuclear operators have together lost 3.2 trillion yen ($31 billion) in the two business years since then and five of them, including Kyushu Electric and Hokkaido Electric, also expect to be loss-making in the year just ended.
Japanese banking practices make it difficult for private lenders to extend credit, including refinancing existing loans, to companies that post three straight years of losses. That means the utilities are turning to a government-owned lender for help as the losses mount up and the cost of importing expensive fossil fuels for power generation while nuclear reactors are idle is draining their capital.
"Capital funds have been continuously declining and liabilities might soon exceed assets," said a senior industry source familiar with Hokkaido Electric's finances. "Continued deficits have made it harder to borrow from banks. The way to solve this is to increase rates to boost revenue, but since this is very hard to do, other avenues are being considered."
Hokkaido Electric's capital ratio - a key measure of financial health - has dropped to 8.9 percent from 24.2 percent before March 2011. Kyushu Electric's capital ratio has more than halved to 11.5 percent. The average capital ratio of Japan's top companies is 43 percent, finance ministry data shows.
"Absent official announcements, I don't know where this is all heading but, if I was asked whether this could spread to other utilities ... it's possible," said Reiji Ogino, a senior analyst at Mitsubishi UFJ Morgan Stanley Securities.
The utilities are also likely to be saddled with huge decommissioning costs as many idled reactors are unlikely to pass strict new standards, a Reuters analysis shows. Re-starts also face political opposition.
Prime Minister Shinzo Abe's Liberal Democratic Party is moving to revive nuclear power, but hasn't been able to get its coalition partner to sign off on a plan that defines nuclear power as an important source of electricity generation.
Of Japan's 48 reactors, 17 are unlikely to be restarted, and as many as 34 may have to be mothballed, the Reuters analysis shows. The cost of decommissioning a reactor is estimated at around $1 billion.
According to industry ministry data, the utilities have spent 9 trillion yen ($86.9 billion) on additional fuel costs in the three years since the Fukushima disaster.
To ease the strain, the companies have been raising electricity charges, but were warned by the industry minister this week that further increases must be avoided.
Six of nine regional monopolies that operate reactors in Japan have raised prices since the Fukushima crisis, while one, Chubu Electric Power Co, has a request pending to increase rates. Price increases for residential customers must be approved by the government.
Kyushu Electric is asking the DBJ to buy 100 billion yen of preferred stock in the company, a source said. The lender is considering the request. "We are in consultations with the Development Bank of Japan about receiving capital support, but since nothing has been decided I'm unable to comment further," said Kyushu spokesman Yuki Hirano.
Shares in Kyushu Electric fell 5 percent on Wednesday - to their lowest close in almost two months - and Hokkaido Electric dropped 5.4 percent after falling more than 10 percent on Tuesday. The benchmark Nikkei 225 ended up 1 percent.
Kyushu Electric has estimated a net loss of 125 billion yen for the year ended March 31.
If both Kyushu Electric and Hokkaido Electric get the aid they've asked for, they would join the Fukushima plant's operator, Tokyo Electric Power Co (Tepco), in receiving government bail-outs. Other nuclear operators may be forced to turn to the government, too, the Nikkei has reported.
In 2012, the government took a controlling stake in Tepco, and the company still relies on taxpayer hand-outs to pay compensation to those affected by the disaster, which forced 160,000 people from their homes. Tepco lost 2.7 trillion yen in the three years to March 2013.
($1 = 103.5750 Japanese Yen)
(Additional reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Mark Bendeich and Ian Geoghegan)