Breakdown of cost reductions under New Comprehensive Special Business Plan (approved on January 15, 2014)
Based on 'New Comprehensive Special Business Plan' approved by the ministers in charge on January 15, 2014, we are proceeding to drastically rationalize management, i. e., reducing cost as much as JPY 4,821.5 billion in total for ten years of FY 2013-FY 2022. And we have sold assets equivalent to JPY 812.2 billion within 3 years from FY 2011 to FY 2013, and achieved our target under 'Comprehensive Special Business Plan'.
Revised Comprehensive Special Business Plan (approved on May 18, 2017)
Note: Figures in parentheses under FY 2014 results are target figures.
The competition procurement ratio in FY 2014 is 55%.
Asset
Sales |
Measures |
Result (¥ billion) |
Target (¥ billion) |
|
FY 2014 results |
Cumulative results
(FY2011-2014) |
Total of 3 years
(FY2011-2013) |
| Real estate |
24.6 |
362.4
(Progress rate: 146.6%) |
247.2 |
| Securities |
1.2 |
330.0
(Progress rate: 99.9%) |
330.1 |
| Affiliated Companies |
5.2 |
150.9
(Progress rate: 116.1%) |
130.1 |
| Total |
31.1 |
843.4 |
707.4 |
Note: Figures in parentheses under Achievement FY 2014 are target figures.
The figures are sum total of the TEPCO Group.
Sum may be inconsistent by rounding off.
Cost Reductions
Procurement expenses of materials and services
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 |
FY2015 |
Total of 10 years
(FY2013-2022) |
334.8
(139.7) |
96.4 |
1,506.1 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Reduction of depreciation costs by cutting facility investments |
- Reduction of capital investments for the short and mid term
- Cancel new showrooms for promotion activities (Switch Station)
- Reduce construction for expanding trunk transmission systems etc.
- Drastic Review on Mid- and Long-term Investment Plan
- In order to minimize facility investment costs, we will implement demand control measures and will in principal procure power sources from outside via a bidding process for all new and replacement thermal power development projects.
|
| Suspension or revision of timing of construction and inspection |
- Emergency reduction of repair costs (revision concerning the construction of power network facilities)
- Permanent revision of construction timing while ensuring stable supply etc.
- Revise facility inspection intervals
- Revise equipment inspection methods
- Suspend some repair work of communication cables etc.
|
Transactions with affiliate companies:
expand competitive procurement |
- Negotiate a 10% transaction price discount with current business partners, which is the expected discount rate, if procurements are made via competitive bidding.
- Cost improvements with affiliate companies and expansion of new suppliers
- Implement negotiation in consideration of market prices such as setting a benchmark on the prices in the transactions
- Promote optimal procurement methods such as competitive bidding
- Increase the cost cut amounts via reforming the cost structures in subsidiaries and affiliate companies
|
| Transactions with group companies: Construction efficiency improvements |
- Cut repair and maintenance costs etc. by increasing the productivity of construction work related to power distribution with group companies or construction companies unaffiliated to TEPCO or via price negotiations and contract reviews based on introductory trials and effective evaluations of new ways of construction or new materials that will lead to enhanced productivity
|
| Reviewing the transaction structures and ways of ordering relating to external business partners |
- Lower maintenance costs and outsourcing expenses by adopting an order method to minimize costs as much as possible for each contract and review present supplier relationships via considering new business partners and thorough progress management of each project (reflecting an approx. 10% costcut from the current prices by negotiating down to a level calculated based on the expected costs realized via bypassing any middlemen or competitive bidding, as is presently being done with TEPCO's group companies)
- Review the negotiation / business process: from transactions through agents to direct transactions with manufacturers
- Review order methods: from blanket orders to separate orders made for individual construction assignments
- Create competition by placing bids for new business partners or loosening transaction restrictions
- For those transactions not easily implemented through the bidding process, we will try to cut maintenance costs and outsourcing expenses by negotiating thorough cost cuts via proposing spec changes and/or requesting spec changes from our suppliers.
|
Standardization of equipment specification
(Smart meters) |
- Review smart meter procurement methods in order to cut costs
|
| Standardization of designs / specification among electric power companies <long-term issue> |
- Concrete cost reductions will be realized through such measures as interviewing manufacturers and other electric power companies. Prior to the interviews, we will select items to be standardized with other power companies
|
Power purchase and fuel expenses
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 |
FY2015 |
Total of 10 years
(FY2013-2022) |
228.5
(155.6) |
40.5 |
762.2 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Reduction of Fuel Prices (Unit Prices) |
- Fuel conversions of emergency power sources from light oil to cheap city gas.
- Reduction of agency commissions for LNG imports
- Reduction of fuel prices for newly installed power supply sources
|
| Reduction of Fuel Costs from a Mid-to-Long Term Perspective |
- In order to stabilize fuel procurement and minimize purchase costs, we will implement measures such as constructing and operating fuel facilities with outside parties, procuring fuels with outside parties, and diversifying procurement sources.
|
| Application of Efficient Power Sources |
- Cost reduction via streamlining of daily operations based on discussions with relevant parties In order to increase the availability factor of LNG fired thermal power plants whose costs are relatively low
- Increase in amount of power received from cheaper power sources available from other companies'
|
| Utilizing the Japan Electric Power Exchange (JEPX) |
- Reduce fuel costs by purchasing cheaper power from JEPX
- Increase power sales to other companies by selling power through JPEX
|
| Reduction of Power Purchase Expenses |
- Negotiate to reduce unit prices at the time of re-signing
- Negotiate to have jointly owned thermal power companies and in-house power generation producers etc. reduce their fixed costs etc.
|
Personnel expenses
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 |
FY2015 |
Total of 10 years
(FY2013-2022) |
140.2
(125.8) |
127.7 |
1,296.0 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Personnel Reductions |
- After thorough streamlining via readjusting the group structure and drastic operational efficiency improvement, we will reduce the number of persons by cutting back on hiring and implementing voluntary retirements ahead of schedule (approx. 7,400 employees on a consolidated basis, approx. 3,600 employees on a non-consolidated basis)
- To further enhance management rationalization, we implemented a volantary retirement program in the scale of 1,000 personnel in FY 2014, targeting employees over 50-year-old.
|
| Reduction of Salaries and Bonuses |
- Continue to cut annual earnings across the board
- Introduce a new personnel evaluation system
- Reduce overtime wages (reduction to 25% on weekdays which is the bottom limit of the legal standard)
- Implement a further reduction by going through the personnel scheme in more detail, such as deliberate appointment of employees
|
| Revision of the Retirement Benefit Scheme |
- Revise the pension system (reducing the interest rate used for revaluation [to 1.5% for active employees and 2.25% for retirees], and reduction of whole life annuity [-30%])
|
| Revision of Benefit Programs |
- Revision of health insurance, asset-building schemes, cafeteria plan, employee stock ownership plan
|
Other expenses
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 |
FY2015 |
Total of 10 years
(FY2013-2022) |
153.9
(155.1) |
98.1 |
1,093.0 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| System outsourcing |
- Reduce contracts for system services, facility services as well as survey and analysis services.
|
| Other expense (ex. donation) |
- Cease donation activities. Review membership fees, union fees, etc.
|
| Welfare facilities and offices |
- Reduce welfare facilities and company housing costs
- Reduce office space being rented in anticipation of personnel reductions
|
| promotion/ advertising costs |
- Reduce TV, radio, newspaper, and magazine advertising costs etc.
|
| Theme research |
- Reduce Central Research Inst of Electricity Industry contribution. Suspend theme research other than research related to decommissioning, safety operations and stable supply. Reduce the institute's management fee.
- Additional research cost reductions by reviewing proposed research themes based on research progress and revision of the investment plan.
|
| Employee training |
- Reduce management education training and operation center costs, etc.
|
| Consumables |
- Reduce office supply purchases such as PCs and reading materials.
|
| Others |
- Review the transportation services for waste management. Reduction of compensation costs.
|
Expenses related to investment for rationalization
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 |
FY2015 |
Total of 10 years
(FY2013-2022) |
-0
(-0.1) |
-5.8 |
164.1 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Rationalization in the thermal power stations |
- Reduction of fuel supply expenses by enlargement of introduction of Lean LNG, improvement of the availability ratio of coal power stations, upgrade of facilities of existing LNG power stations for improvement of efficiency, etc.
|
Asset Sales
Securities
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 results |
Cumulative results
(FY2011-2014) |
Total of 3 years
(FY2011-2013) |
| 1.2 |
330.0 |
330.1 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Securities |
- Sell securities within in principle 3 years, except those securities essential to the electric power business. (96% of the target amount scheduled to be completed by FY2013 was accomplished in FY2011.
|
Affiliated Companies
| Result (¥ billion) |
Target (¥ billion) |
| FY2014 results |
Cumulative results
(FY2011-2014) |
Total of 3 years
(FY2011-2013) |
| 5.2 |
150.9 |
130.1 |
*The amount provided in the parenthesis in FY 2014 results is the target amount.
| Specific measures |
| Items |
Contents |
| Affiliated Companies |
- Sell 45 affiliated companies within in principle 3 years, which were targeted for sell off in the Committee's report.
- Management streamlining plans will be developed and implemented with the whole TEPCO Group for those affiliated companies not targeted for sell-off. (reduce ¥351.7 billion in 10 years)
- 11 companies targeted for re-organization will be consolidated/reorganized based on a 4 business/role-model.
|
| Specific measures |
| Items |
Contents |
| Incidental Businesses |
- The selling of internet service businesses will be accomplished by FY2012, and the disposal of Power Supply Stand businesses were completed by FY2011.
|
