There has been much discussion lately about the financial situation of Taiwan Power Co (Taipower) and the construction of the Fourth Nuclear Power Plant in Gongliao District (貢寮), New Taipei City (新北市). As director of Taipower’s legal affairs office, I would like to share some facts.
First of all, international fuel prices have surged over the past 10 years. In an effort to support the government’s carbon reduction policy, there has been an increase in natural gas purchases and power generation which has resulted in Taipower suffering continued financial losses since 2006.
Today, the accumulated losses stand at NT$197.4 billion (US$6.6 billion), a debt ratio as high as 89.7 percent, with additional financial losses of NT$59 billion expected this year.
Then there is the issue of the construction of the Fourth Nuclear Power Plant. Taipower was established in accordance with the Company Act (公司法), and it holds full responsibility for its profits and losses. That means that Taipower must raise money for the construction project by itself, by issuing corporate bonds, commercial paper and even loans. To this day, the government and taxpayers have not contributed financially.
By the end of last year, the book value of the power plant’s fixed assets had reached NT$263.9 billion. If a referendum to halt construction is passed and the project is terminated, commercial operation would of course become impossible. If that were to happen, Taipower would have no choice but to list it as a loss according to International Financial Reporting Standards.
Along with the accumulated book losses, the total loss would reach NT$460 billion, a figure that is much higher than the company’s paid-in capital of NT$330 billion. As a result, the company would have no choice but to file for bankruptcy in accordance with the Company Act.
Finally, let us discuss the decommissioning of the nation’s other three nuclear power plants. If the three existing plants are decommissioned as planned after each has been operating for 40 years, the six units at the three plants would all be decommissioned between 2018 and 2025. The equipment depreciation and amortization of the three plants have already been completed. Including the NT$0.17 that is allocated for the Nuclear Backend Fund (核能發電後端營運基金) — which currently holds NT$200 billion — the cost for power generated is NT$0.72/kWh, and this is crucial to improving Taipower’s finances.
Provided that the safety of these three plants is assured, the most ideal solution for Taipower would be to follow the example set by the US and defer the decommissioning of these power plants for 20 years.
If we do not do that, the question of how to compensate for the 40,000 GWh of power produced by these plants every year would be extremely difficult to answer.
Hu Ta-ming is director of Taiwan Power Co’s legal affairs office.
Translated by Eddy Chang