Publication Investor Briefing - Electric Power Development Co., Ltd (J-POWER) 2023 AGM
Executive Summary
The Electric Power Development Co., Ltd (J-POWER) is the second largest power utility in Japan, with operations covering power generation, transmission and distribution. Since 2000, it has undertaken assertive international expansion with these assets accounting for a quarter of installed capacity, predominantly in Asia.
Despite claims of working “steadily to achieve carbon neutrality”, J-POWER’S climate transition plan falls far short of aligning with the goals of the Paris Agreement:
- The company does not have a phase out schedule for domestic coal assets in line with a net zero pathway (which, in OECD countries, requires coal phase-out).
- Short and medium term emission reduction targets are not Paris-aligned.
While global energy markets shift towards renewables and many countries implement policies to phase out coal, J-POWER’S current energy portfolio still relies heavily on coal-fired power plants. Ongoing investments in coal-fired power plants and in unproven-at-scale technologies to prolong their life, like hydrogen/ammonia co-firing and coal gasification with CCS, create a major risk of stranded assets.
Despite the global trend towards renewables, J-POWER's decarbonisation plan does not reflect a robust commitment to this sector. Vague targets and tepid growth plans for renewable energy expose a lack of ambition incompatible with Japan's aggressive renewable energy targets and the global shift towards clean energy.
J-POWER’s strategy does not provide clear information on the planned retirement of coal-fired power plants - a crucial step towards achieving significant emissions reductions. This ambiguity poses significant risks to the company’s climate credibility and long-term shareholder value.
The combination of a slow transition to renewables, over-reliance on unproven technologies, and lack of clear planning for coal plant closures could jeopardize J-POWER's profitability in an increasingly decarbonising global economy, threatening long-term investor interests and value.
J-Power must set a credible decarbonisation strategy and science-based short-, medium- and long-term GHG emissions reduction targets aligned with the goals of the Paris Agreement and investor expectations.
This presentation outlines the strong case for:
- voting FOR the two shareholder proposals on target alignment with 1.5C and remuneration linkage to GHG reduction
- voting AGAINST the re-election of Director Kanno to the company’s Board
Key Takeaways:
J-POWER’s decarbonisation strategy lacks clarity, innovation, and urgency, undermining long-term investor interests and climate alignment.
- Failure to align with Paris Agreement goals: J-POWER's decarbonisation targets fall woefully short of the rigorous standards set by the Paris Agreement. The company's lack of urgency in setting and achieving more ambitious near-term goals questions its commitment to a meaningful transition towards a low-carbon future.
- Over-reliance on unproven technologies that prolong the use of coal: J-POWER's strategic reliance on technologies like hydrogen/ammonia co-firing and coal gasification with CCS, which are unproven at scale, is concerning. These strategies, while portrayed as innovative, have not demonstrated commercial viability or effectiveness in achieving large-scale emission reductions, thus making them a risky cornerstone of a decarbonisation plan.
- Underutilisation of renewable energy: Despite the global trend towards renewables, J-POWER's decarbonisation plan does not reflect a robust commitment to this sector. The vague targets and tepid growth plans for renewable energy expose a lack of ambition, which is incompatible with Japan's aggressive renewable energy targets and the global shift towards clean energy.
- Opaque power network stabilisation plans: J-POWER's power network stabilisation strategy, while seemingly a step in the right direction, lacks clarity and connection to tangible emissions reductions. This suggests a potential complacency or lack of understanding in how infrastructure modernisation can contribute to climate goals.
- Lack of transparency on coal power phase-out: Concerningly, J-POWER’s strategy does not provide clear information on the planned retirement of coal-fired power plants - a crucial step towards achieving significant emissions reductions. This ambiguity poses significant risks to the company’s climate credibility and long-term shareholder value.
- Remuneration linkage, unconvincing commitment to climate goals: While J-POWER's attempt to link performance-based compensation with Material Issues including climate change is a positive step, it falls short of demonstrating a robust commitment to climate change mitigation. The absence of specific, quantifiable climate-related performance targets within the remuneration structure indicates a potential misalignment between executive incentives and the urgency of the climate crisis.
- Inadequate leadership on climate accountability: J-POWER's board of directors bear the responsibility for ensuring that the company's strategy aligns with the urgency of the global transition to a low-carbon economy. The lack of transparent, ambitious climate-related targets and strategies, as well as a lack of clear disclosure around plans for coal power phase-out, raises questions about the board's commitment to and understanding of the necessary energy transition.
- Threats to long-term profitability and shareholder value: J-POWER's slow renewables transition, reliance on unproven technologies, and lack of coal plant closure planning could threaten long-term profitability and investor value in a decarbonising economy.
Download our J-POWER 2023 AGM analysis here.
Read our supporting investor brief for the shareholder resolutions here.
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