Company history

Kansai Electric did not begin as a venture; it was assembled by decree. On 1 May 1951 the Electric Utility Reorganization Order dissolved the state generator Nippon Hassoden and the nine wartime distribution companies, and replaced them with nine private utilities that each generated, transmitted and sold power within one region. Kansai Electric was one of them, capitalized at $4.7M (¥2bn) out of contributions in kind — ¥840 million from Nippon Hassoden, ¥850 million from Kansai Distribution. It opened with 2.28 GW of plant (1.13 GW hydro, 1.15 GW thermal), sold 5,655 GWh in its first year, and served 2.68 million accounts. Shin Hori became chairman and Shiro Otagaki president; the head office went up in Umegae-cho, Kita-ku, Osaka. The shares listed in Osaka that July and in Tokyo in August.

Its founding problem was arithmetic: demand in the region was growing about 10% a year and supply could not follow. Even a three-year plan to add 970 MW through fiscal 1953 still left a projected shortfall of more than 3 billion kWh a year in a normal water year. In 1951 the company won rate increases of 40% on flat-rate lighting, 26% on metered lighting and 31% on large-lot lighting — and then did not raise rates again for fourteen years, absorbing rising materials, labour, repair and depreciation costs through efficiency instead. That refusal to reprice hardened into the company’s self-image, and later into its central liability.

The proof of its engineering nerve was Kurobe No. 4. In May 1956 the government’s power-development council named Kansai Electric — not Hokuriku Electric or the state developer — as the builder, and the following month it announced a 258 MW station deep in the Northern Alps. The access tunnel from Omachi ran into an 80-metre fracture zone that flooded the face; the dam site was hit by a typhoon; the underground powerhouse was fought in extreme heat and humidity. Kansai broke through with a fleet of machinery unusual for Japanese civil engineering at the time — 28-tonne dump trucks, drill jumbos, rocker shovels, long belt conveyors — and the cost rose from an estimated ¥37 billion to over $138.9M (¥50bn). The station was dedicated in June 1963, and the industry that emerged from it, mechanized and confident, was the one Kansai would carry into nuclear power.

The logic of the nuclear turn was cost volatility, not novelty. Thermal plants burning imported fuel left earnings hostage to procurement prices, and Kansai’s customers were manufacturers who needed a stable, cheap baseload. Nuclear power, whose economics barely move with fuel prices, answered that; a stretch of the Wakasa Bay coast in Fukui offered wide sites and little seismic or typhoon exposure, and in 1962 the town of Mihama was chosen. Construction of Mihama No. 1 — a 340 MW Westinghouse pressurized-water reactor — began in December 1966, the same month Tokyo Electric started Fukushima No. 1 with a boiling-water design; Mihama entered commercial service in November 1970, the first commercial PWR operated by a Japanese utility. Kansai secured fuel through eight-utility long-term uranium contracts with Denison Mines (December 1967) and Rio Algom (January 1968), and by 1973 had committed to 5.67 GW of nuclear capacity, a programme roughly the size of Tokyo Electric’s. Clustering Takahama and Ohi along the same bay made construction and operation cheaper still; by 2010 nuclear supplied about half of Kansai’s own generation, the highest share in Japan.

The bill for nineteen years of frozen tariffs came due in 1973. That summer Kansai issued nine peak-cut orders forcing large users to cut consumption by an average 20% — there had been none the year before — while the regional trade bureau pushed voluntary 15–20% savings and prefectures demanded that power stations burn less fuel. Steelmakers and chemical firms shut production lines even as they were told to raise output. On 20 June the company filed for its first increase since October 1954: 15.8% on lighting, 35.2% on power. The freeze had been doctrine, not accident. Otagaki’s dictum that a company granted a regional monopoly must be exceptionally rigorous about efficiency passed to Yoshishige Ashihara and Seizo Yoshimura, and it showed in the balance sheet — an equity ratio of 38.5% at the end of fiscal 1966 against Tokyo Electric’s 26.9%. But it also meant financing a capital programme that grew from ¥105.7 billion in fiscal 1968 to ¥295.4 billion in fiscal 1972 — close to Tokyo Electric’s ¥315.3 billion — on sales of ¥192.1 billion against its rival’s ¥331.5 billion. Ashihara later noted that matching Tokyo Electric’s 13.7% increase in 1961 would have brought in $138.9M (¥50bn) a year.

Siting was the harder constraint. Kansai’s load sat around Osaka Bay and the Inland Sea, right next to its coastal thermal plants, which kept transmission short and losses low — but once pollution became political, no new thermal capacity could go up in a dense city, and most of the remaining coastline was national or quasi-national park. A second Tanagawa station pitted the company against Osaka’s governor and residents; Kyoto’s governor withheld consent to the Shin-Miyazu site from 1965 onward. In August 1973 Kansai began demanding written guarantees of nitrogen-oxide removal rates from boiler makers such as Mitsubishi Heavy Industries and Hitachi, and told local governments it would rebuild the boilers at every thermal plant in its territory during fiscal 1974 to cut emissions 40–50% against 1970. Regulation tightened on the nuclear side too: after Three Mile Island, the Nuclear Safety Commission took the unusual step in April 1979 of halting the running 1,175 MW Ohi No. 1 for an emergency-core-cooling analysis, restarting it in June. Spent fuel then became the industry’s shared problem, and in July 1984 Kansai’s president Shoichiro Kobayashi, newly chairman of the utility federation, formally asked Aomori Prefecture and the village of Rokkasho to host reprocessing, enrichment and low-level waste facilities; the prefecture accepted in April 1985. In 1987 Ashihara, who had held real power for more than thirty years, was removed from the board.

On 9 February 1991 a steam-generator tube ruptured at Mihama No. 2 and the emergency core cooling system fired — the first such activation at a commercial reactor in Japan. The cause was an anti-vibration bar that had never been seated where the drawings put it. Mihama No. 2 was the first domestically built reactor, more than twenty years old, and no record survived to explain why it had been assembled that way; once the unit was closed up, the fitting could not be seen, and two decades of periodic inspections had passed over it. The reactor shut down safely and nothing escaped, but Seiji Morii, president since November 1985, refused the comfortable explanations. He called the accident a man-made disaster born of overconfidence in the company’s own technology, and stepped down in November 1991 when the investigation closed. The reforms pulled safety toward the centre: the president would henceforth also head the nuclear division, all 25,000 employees were given plant safety as their top objective, a nuclear audit team was placed in the president’s quality-audit office, and an Institute of Nuclear Safety System was set up outside the company to study the human causes of accidents. Fax and pager channels were built so that neighbouring residents would not again hear late. His successor Yoshihisa Akiyama also held the nuclear post.

The 1990s brought a second front. Liberalization had already opened large-lot retail supply, and Kansai moved to meet it by selling things other than electricity: K-Opticom, founded in 2000 on a telecom arm that dated to 1988, took fibre-optic service to households at ¥6,300 a month when NTT was charging around ¥10,000, and cut it to ¥4,900 by 2005; Kanden Gas & Cogeneration followed in April 2001 to sell gas and combined heat and power against Osaka Gas on its own ground. Yosaku Fuji, president from June 2001, set three-year targets of ¥150 billion or more in ordinary profit, a 2.3% return on assets and an equity ratio above 20%, to be reached by cutting capital spending hard and paying down debt. The plan was beaten: ordinary profit reached ¥297.8 billion in the year to March 2005 and net profit ¥161.0 billion the year after.

Then the efficiency drive collected its debt. On 9 August 2004 a secondary-loop pipe burst at Mihama No. 3, and superheated water above 100°C killed five contractor workers and injured six — the worst casualty accident at an operating Japanese nuclear plant. The ruptured section had been left off the inspection list for the twenty-eight years since the unit started in 1976, thinning steadily where a flow meter disturbed the water. Within days fifteen more omissions surfaced, and Kansai shut all eleven of its reactors — 9.76 GW — for checks, covering a 30.25 GW summer peak by restarting mothballed thermal plants and buying from others. There had been chances to catch it: after a similar rupture at Surry in the United States in 1986, Kansai and Mitsubishi Heavy Industries had written a voluntary inspection guideline in 1990; Mitsubishi warned the inspection affiliate about wall thinning in 1999 and 2000; the affiliate noticed the gap in April 2003 and submitted a corrected list that November — and Kansai deferred the work to the next scheduled outage. Under liberalization its capital spending had fallen from ¥769.7 billion in fiscal 1998 to ¥321.5 billion in fiscal 2003, repairs from ¥347.2 billion to ¥185.8 billion, and outages from three months to some forty-odd days. The regulator’s final report of March 2005 found the accident foreseeable and preventable and pointed to a frayed safety culture; Fuji left the presidency for a director’s post overseeing quality, and Shosuke Mori, an engineer, took over. Crude prices then produced an ordinary loss of ¥12.6 billion and a net loss of ¥8.8 billion in the year to March 2009, before Makoto Yagi restored ¥193.1 billion of ordinary profit the following year.

The concentration that had made Kansai efficient made it fragile. When Japan’s reactors went offline after 11 March 2011, no utility was more exposed: nuclear had supplied 53% of Kansai’s own generation in the year to March 2010, against 12% at Chubu Electric. Replacing it with imported fuel produced an ordinary loss of ¥265.5 billion and a net loss of ¥242.3 billion in the year to March 2012, and the red ink ran four years — ordinary losses of ¥353.2 billion, ¥111.3 billion and ¥113.1 billion followed. Equity fell from ¥1.81 trillion to ¥1.04 trillion between March 2011 and March 2015 while interest-bearing debt swelled from ¥3.41 trillion to ¥4.40 trillion; operating cash flow collapsed from ¥610.5 billion to ¥43.9 billion in a single year. Kansai raised rates by an average 9.75% in May 2013 and again in April 2015. Keeping idle reactors maintained cost close to ¥300 billion a year, and whether Ohi and Takahama ran at all swung annual costs by roughly ¥350 billion.

What it could control, it did. In November 2012 Kansai agreed with BP to buy about 500,000 tonnes of LNG a year for fifteen years from fiscal 2017, priced against natural-gas indices rather than crude — the first Japanese long-term contract written that way, and worth roughly 30% less than oil-linked supply at the time even after liquefaction and shipping. Sourcing across BP’s portfolio, from Trinidad and Tobago to Egypt, also insulated it from a single project slipping its start-up date; the margin for error was thin, as a day in August 2013 showed when two plant failures forced emergency purchases of up to 500 MW and demand reached 96% of supply. Takahama Nos. 3 and 4 cleared the new safety standards and restarted in January 2016, only for the Otsu District Court to enjoin their operation that March, costing an estimated ¥10 billion a month in forgone improvement. Even so, collapsing fuel prices returned the company to profit in the year to March 2016 — ¥241.7 billion ordinary, ¥140.8 billion net — though on an underlying basis only about ¥40 billion. Full retail liberalization arrived in April 2016 and Kansai answered by attacking Osaka Gas on gas tariffs that December, bundling gas with electricity in January 2017. By March 2019 debt was down to ¥2.01 trillion and equity back to ¥1.51 trillion.

In September 2019 it emerged that twenty Kansai executives had accepted some ¥320 million in cash and goods over seven years from Eiji Moriyama, a former deputy mayor of Takahama, the town hosting its reactors. Chairman Yagi, president Shigeki Iwane and four others resigned that October, and a third-party committee under a former prosecutor-general found in March 2020 that 75 group officers and employees had taken about ¥360 million in total. Worse than the taking was the burial: an internal investigation completed in 2018 had gone neither to the board nor to shareholders. The trade ministry issued a business improvement order, and in June 2020 Kansai converted to a company with a nominating committee, seating a majority of outside directors and installing former Keidanren chairman Sadayuki Sakakibara as chairman. The grid had already been separated that April into Kansai Transmission and Distribution. Takashi Morimoto, president since June 2019, carried the rebuild.

The misconduct did not stop there. Antitrust raids in 2021 established that for about two years to autumn 2020 Kansai had led an arrangement with Chubu, Chugoku and Kyushu Electric not to undercut each other outside their home territories; Kansai reported itself first, cooperated fully, and escaped the surcharge under the leniency programme. In December 2022 it emerged that 726 employees and contractors had improperly viewed 14,805 records of new entrants’ customers over three months. Morimoto announced his departure in April 2022 after two years, saying the kickback matter was on a settled course, and Nozomu Mori succeeded him, conceding publicly in January 2023 that compliance had not been driven deep enough.

The finances then swung violently the other way. Fuel prices produced an ordinary loss of ¥6.7 billion in the year to March 2023; the next year, with seven reactors running, Kansai posted a record ordinary profit of $5.1B (¥766bn) and net profit of ¥441.9 billion, lifting equity to ¥2.27 trillion, and ¥518.5 billion of ordinary profit with ¥3.46 trillion of equity by March 2026. Mori spent that earning power on becoming a maker of demand rather than a servant of it. With Kansai’s power demand flat and generative AI expected to make data centres the fastest-growing load in the country, the company put its cheap restarted nuclear output, the network of its telecom subsidiary Optage and its property arm’s land bank behind a 50/50 joint venture with the American operator CyrusOne, established in May 2023 to build hyperscale sites of some 900 MW total in the Tokyo and Kansai regions — more than $7.1B (¥1tn) over ten years. In April 2026 it went further, publishing a plan to invest a cumulative ¥15 trillion by 2040 and raise generating capacity by 30%, with ¥1 trillion of growth investment in the first three years and, Mori conceded, little profit to show while the costs run ahead of the returns.