Japan's JERA Books Hefty One-off Losses on 2019/20 LNG Supplies

Japan's JERA, the world's biggest buyer of liquefied natural gas (LNG), booked tens of billions of yen in estimated one-off losses on its supply in the year ended on March 31, due to slumping prices, its president Satoshi Onoda said on Thursday. 

The losses highlight the issue for Japanese utilities, which have committed to large LNG volumes on contracts linked to oil prices, while spot prices for the chilled fuel are barely off record lows touched this year due to oversupply and the drop-off in demand because of the coronavirus pandemic. JERA's losses include more than 10 billion yen ($90 million) from the resale of LNG cargoes for the past financial year and the current one, as well as expected further losses in the next few years on supplies it is committed to under term contracts. 

JERA declined to give any further breakdown of the losses. Still, JERA, owned by Tokyo Electric Power and Chubu Electric Power, booked a net profit of 168.5 billion yen for the year ended March 31, up from 22.5 billion yen a year earlier, helped by its thermal power business. 

JERA became a major electricity generator in 2019 with the formal takeover of power stations owned by its two shareholders. "The coronavirus pandemic reduced electricity demand by 12% in April and May from what we had anticipated earlier," Onoda told a news conference. 

To cope with falling fuel demand from the weaker electricity sales, JERA has been taking measures to cushion LNG losses. 

"We have made adjustments, including changing shipping schedules and reselling supplies to third parties, so that our LNG inventories would not overflow until autumn," Hisahide Okuda, JERA's director said. Asian spot LNG prices have more than halved so far this year, and are significantly below the average price Japanese buyers pay under oil-linked contracts. 

($1 = 107.2500 yen) 

(Reporting by Yuka Obayashi; Editing by Tom Hogue)