Regional and Wholesale Utilities FY2026 Full Year: Kyuden Wins, Tohoku Slumps

This fiscal year marked a major turning point for the power industry, defined by four key themes:

• Revenue declines due to stabilizing fuel prices: Dropping raw fuel prices reduced electricity bill adjustments, creating a negative revenue impact for all companies.
• Diverging paths for nuclear restarts: Tohoku Electric successfully restarted its Onagawa No. 2 reactor, but rising regulatory review costs burdened other utilities.
• Intense competition for customers: Competition with new power producers intensified, causing retail sales volumes to fall sharply at Kyuden and Hokkaido Electric.
• Stronger balance sheets and shareholder returns: Despite volatile earnings, companies moved to increase dividends, with Shikoku Electric and Hokkaido Electric announcing substantial hikes.

The financial results clearly highlighted a sharp divide, making the winners and losers highly visible.

Kyuden posted a 20.0% year-on-year increase in net profit to 154.5 billion yen. Its operating profit margin reached 10%, leading the five compared utilities as it successfully capitalized on cheaper fuel costs.

In contrast, Tohoku Electric struggled the most. Its net profit fell 53.5% year-on-year to 85.0 billion yen, plunging by more than half. Although the Onagawa nuclear plant was restarted, valuation losses on price hedges took a heavy toll. Despite a recovery in its underlying business, mark-to-market losses on trading dragged down its final performance.

Faced with population decline and fierce competition, each utility is carving out a different strategy:

• Kyuden: Boosting non-power businesses: With retail power sales dropping 9.3% year-on-year, the company is rushing to establish alternative revenue streams in ICT and urban development.
• J-POWER: Clearing unprofitable assets: The company wrote down aging thermal power plants to lighten its balance sheet, while speeding up structural reforms by divesting US assets to secure cash.
• Shikoku Electric and Hokkaido Electric: Enhancing shareholder returns: Despite lower profits, Shikoku Electric raised its annual dividend by 5 yen to 55 yen per share, while Hokkaido Electric raised its dividend by 12 yen to 32 yen per share to attract investors.

The five utilities remain vulnerable to several external risks beyond their control:

• Volatile fuel prices: Tensions in the Middle East and other regions could trigger another surge in fuel prices, bringing the ongoing risk of hedging losses.
• Nuclear regulatory uncertainties: Safety upgrade costs continue to rise, and any delay in restarting reactors directly drags down profitability.
• Market share loss from deregulation: Competition with rival major utilities and new entrants shows no sign of slowing. With sales volumes declining, utilities must offer value beyond mere electricity supply.

When evaluating these companies, look beyond their stability as infrastructure providers and focus on their adaptability. Survival will require more than just selling electricity. Companies will need talent who can drive non-power revenues, as seen in Kyuden's strategy. Candidates who embrace change are the ones who will thrive in this evolving landscape.