New Tepco chief ready to face challenges

Sudo brings risk management skills to nation's toughest job

by Sayuri Daimon

Staff Writer

When Kazuhiko Shimokobe signaled late last year his intention to step down as chairman of Tokyo Electric Power Co., as the company and the government were forging a new 10-year business plan, officials knew it would be difficult to find a successor.

“As we tried to compile the plan, all of the outside directors felt we were really facing an extremely difficult environment. At that point, I’m sure nobody, including myself, wanted to continue serving as an outside director beyond June this year,” recalled Fumio Sudo, who on Tuesday took over as chairman of Tepco.

Skyrocketing compensation payments and costs for decontamination work, and the continuous increase of radioactive water at Fukushima No. 1 are just a few reasons why few people were eager to lead the embattled company.

In the end it was Sudo, a former president of steel maker JFE Holdings Inc., who was tapped to take over from Shimokobe, a lawyer who was brought in from the outside in June 2012 to serve as chairman.

Though initially reluctant, Sudo decided that steadily implementing the business plan and tackling all the problems bedeviling Tepco would result not only in reviving the utility but also in rebuilding Japan, he said.

“Considering the urgent need, I thought I had to push myself and take on this responsibility,” Sudo told The Japan Times in an interview last Thursday.

The revised business plan, which took effect this month, includes measures to increase government bond issuance to ¥9 trillion from ¥5 trillion to help Tepco pay compensation to victims of the nuclear crisis and to reduce costs by ¥4.8 trillion over the next 10 years.

It also seeks to reactivate two of the reactors at the Kashiwazaki-Kariwa power plant in Niigata Prefecture, in July and August, to reduce the heavy cost of importing fossil fuels for thermal power generation.

Sudo, who led Kawasaki Steel Corp. to consolidate with NKK Corp. to create JFE Holdings in 2002, said that the huge debt held by Japan Airlines and the old Japanese National Railways were limited and the figures were clear, but how much money Tepco will need for compensation and other costs in the coming years is uncertain.

Under the new turnaround plan, Tepco estimates that its compensation payments will reach roughly ¥4.9 trillion.

“Even skilled corporate managers can’t see the end to the problem,” Sudo said. “But even as this situation continues, we must face the challenge directly. At least the roles of the government and financial institutions are becoming clear now.”

But he admitted that there are problems that will not be easy to resolve, such as the seemingly nonstop glitches and mistakes plaguing Fukushima No. 1 and the lack of experienced workers there.

“We have 4,000 to 5,000 people working (at Fukushima No. 1) every day, but only about 1,000 are Tepco employees. The rest are third- and fourth-level subcontractors from across the country,” the chairman said.

“There is an annual radiation exposure limit for each person. Wearing bulky protective gear, workers have difficulty communicating with other workers only 5 meters away. . . . And under such circumstances, supervisors also face a tough time managing the workers.”

Though the utility conducts training for workers, their allowable radiation exposure reaches the limit in half a year and experienced workers have to leave.

Tepco has no choice but to ask subcontractors to continue looking for new — and inexperienced — workers.

Emphasizing the importance of risk management skills, he recalled his experience in the Great Hanshin Earthquake in 1995.

He was deputy head of Kawasaki Steel’s Chiba steel plant. Under him was the Nishinomiya plant in Hyogo Prefecture.

As soon as he heard the news that morning that shinkansen operations were suspended, he ordered his staff to purchase all available seats on flights between Tokyo and Osaka. He also chartered two helicopters.

“I’ve gone through such crises, but there aren’t many people who have experienced a serious accident in the field. . . . Without such experience, I know it’s not easy to maintain operations,” he said.

Saddled with trillions of yen in compensation payments, Tepco also needs to improve its financial standing. The company has already received a ¥1 trillion capital injection from the government-backed Nuclear Damage Liability Facilitation Fund, which effectively left it under government control.

The 73-year-old Sudo said Tepco will have to change, especially in terms of cost management.

For example, Tepco’s 92 power-generating units are now competing with each other to be the most cost-efficient, and the new transparency means it’s clear to see how they rank against each other.

The major challenge Tepco faces, according to Sudo, is whether it can regain the public trust it lost in the Fukushima debacle.

“To do that, Prime Minister (Shinzo) Abe ordered us to work hard to pay compensation to the victims in Fukushima, to decommission the nuclear reactors there and at the same time ensure a steady supply of electricity in the Kanto region. I totally agree with him.”

Sudo added that Tepco’s in-house company in charge of the decades-long decommissioning of Fukushima No. 1 will tap nuclear power experts from the private sector, including Toshiba Corp., Hitachi Ltd. and Mitsubishi Heavy Industries, Ltd.

But Sudo, meanwhile, insists the government needs to decide the country’s energy policy going forward.

Since the nuclear crisis started, policy has flip-flopped as the parties in power changed. Under the 2010 plan, nuclear power was to generate 53 percent of the nation’s electricity by 2030, but with the 2011 Fukushima disaster, that target was put on hold.

Under the Democratic Party of Japan, the government announced in 2012 that nuclear power would be completely phased out by 2030.

The current ruling bloc, made up of the Liberal Democratic Party and New Komeito, has yet to set new concrete goals for the energy mix.

“We are mere players,” Sudo said. “The government should decide the percentage of Japan’s energy supply to be generated by nuclear power and how many years nuclear power plants should operate. The government must decide whether it is 40 years, 50 years or 35 years.”