Last weekend, an earthquake off the shore of Japan brought an unpleasant reminder of the 2011 Fukushima nuclear disaster almost 10 years ago. Energy utilities have been trying to recover ever since.

Japan once sourced nearly a third of its electrical power from nuclear. That ended after the 2011 earthquake and tidal wave destroyed reactors at the Fukushima Daiichi Nuclear Power Plant, run by Tokyo Electric Power (Tepco). These are still releasing radioactive water. A safe shut down is decades away.

That has changed the industry. Safety requirements have been tightened. Less than a fifth of the country’s reactors are in operation.

Recently, public hostility to nuclear energy was beginning to soften. Electricity prices hit record highs as a result of freezing weather. Peak demand exceeded expected supply by 90 per cent last month. The government took a more lenient stance on restarting reactors. Kansai Electric Power fired up a reactor at its Ohi nuclear plant.

Shares in utilities reflect hopes the worst is over. Tepco has jumped 47 per cent from a December low. Regional utilities Kansai Electric Power and Tohoku Electric Power rose over a tenth. A rally in the benchmark Nikkei index which closed at over 30-year high on Monday, helped fuel the increases.

Yet the costs of generating nuclear power remain steep. Nearly half of Japan’s reactors are scheduled to be decommissioned.

Meanwhile, debt is rising. At Tepco, it has surged to 8.3 times ebitda from 5.7 times two year ago. That means shutting down is not an easy option either. Decommissioning a sister plant to Fukushima Daiichi, Fukushima Daini, is for example expected to cost more than $2.5bn.

Nuclear will play a part in the world’s transition away from hydrocarbons. But this will be easier in countries where seismic activity is low. Japan accounts for around a fifth of the world’s earthquakes of magnitude 6 and above.

Most Japanese energy utilities with nuclear operations trade at a steep price-earnings discount to the Nikkei 225. That gap will persist.

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