For decades, Japan’s electric utilities have relied on these bonds, collateralised by all assets and granted preferential rights under the Electricity Business Act, for their financing. With the grace period ending, companies like Kansai Electric have to adapt their funding strategies. The elimination of these statutory privileges means that new senior unsecured debt could face lower credit ratings and higher financing costs.
Kansai Electric and its peers could expand their investor bases by issuing into the green, transition, and subordinated bond markets domestically and overseas. Electric utilities may also take the opportunity posed by the regulatory change to term out their debt to longer maturities.
With Japan’s energy transition accelerating and the capex needs of the energy sector soaring, much depends on companies finely balancing their funding strategies going forward.
