Wednesday has been an important day for the nuclear industry.
First of all, Japanese prime minister Naoto Kan (pictured) told reporters he wanted to remodel entirely his country’s energy supply around renewable technology. He said:
I have repeatedly said that we need to rethink our basic energy policy from scratch… The direction that it may take will likely be centered around wind, solar, and biomass energy.
Tepco president Masataka Shimizu
The news last week that the Japanese government was close to agreeing a bailout plan for Tepco, the electricity company that owns the Fukushima nuclear plant, should have come as a relief for the company and its debt holders.
But the opposite appears to be true. Amid uncertainty over the structure of the bailout and when it might finally be agreed, Moody’s has taken the proactive step of downgrading the company’s debt, saying that the plan as it looks so far actually increases the risk of a default.
The clause that particularly seems to trouble the ratings agency is the one that Tepco will only be insured for compensation payments of up to Y120bn. Anything above that limit will be the company’s liability.
How significant is it that Fukushima is now rated as a level seven nuclear accident, the highest level, and on a par with Chernobyl?
To an extent, it is not: the upgrade reflects a fresh analysis of historical radiation data rather than a worsening of the current situation. Nothing new has happened overnight to transform this from a level five accident to a level seven.
And many in the nuclear industry are understandably keen to play down the comparison with Chernobyl, which was the only other accident to reach level seven.
Moody’s has been explaining why it downgraded Tepco’s credit rating in the wake of the Fukushima crisis. It’s hardly a decision that needs much justification: the problems have been as visible and arguably as damaging to the company’s reputation as the Gulf of Mexico spill was to BP.
But Moody’s report makes some interesting points: the first being that its analysts think there is a high likelihood of the Japanese government stepping in to prop up the company. This actually gives the company a higher long-term rating than its stand-alone credit profile (SACP), which is now a junk-rated BB+.
There has been a great deal of commentary in the last few weeks that the nuclear crisis at the Fukushima plant is not as bad as the Chernobyl meltdown.
We can only hope that prediction proves correct. But for the nuclear industry, say the analysts at UBS, the consequences are already even worse.
In a mammoth 140-page report looking at the future of the global nuclear industry, they say:
While the 1986 Chernobyl accident, at least to date, had a significantly greater environmental impact, we would argue that Fukushima raises even larger credibility issues for the nuclear industry than previous accidents.
In this week’s readers’ Q&A session, Keith Parker, chief executive of the UK’s Nuclear Industry Association, answers your questions.
In the first of two posts, Keith answers your questions on what constitutes a nuclear meltdown, whether there is likely to be a public backlash against nuclear in the UK and how the industry should now change.
In the second post, published later on Friday, he will discuss whether the events in Fukushima are a good advertisement for the industry, what are the full costs of nuclear power and what the industry’s view is of renewable power.
Next week, Amrita Sen, oil analyst at BarCap, answers all your oil-related queries. Email questions to firstname.lastname@example.org by the end of Sunday, March 27th.
But for now, over to Keith:
I wrote on Monday that China and India were pressing ahead with their nuclear building programmes even in the wake of the Japan crisis. Well, no longer, at least for the moment. China has just made an announcement that could have a huge impact on the nuclear industry.
This is from Reuters:
China has suspended approvals for proposed nuclear power plants and is making a comprehensive safety check of atomic plants following Japan’s nuclear crisis, the State Council, or cabinet, said on Wednesday.