Elliott Investment Management has emerged as a top-three shareholder in Kansai Electric Power, Japan’s second-largest utility and its leading nuclear operator. As reported by the Financial Times, the New York-based fund now holds between 4% and 5% of Kansai Electric’s shares.
Elliott is pressing Kansai Electric to boost shareholder returns through larger dividends and buybacks. Its proposal hinges on the sale of non-core assets worth at least ¥150 billion ($1 billion) annually. According to Elliott’s estimates, Kansai is sitting on more than ¥2 trillion ($13.5 billion) in non-essential holdings, including a sizeable stake in a construction company and property assets valued at over ¥1 trillion.
Shares surged in Tokyo on Wednesday following reports of Elliott’s stake, climbing as much as 9.5% before easing slightly, underscoring investor optimism that the activist campaign could unlock hidden value.
In recent years, activists have targeted Japanese corporations that sit on vast real estate portfolios carried at historical book values rather than market prices. Selling such assets can deliver large windfalls, allowing companies to recycle capital into growth or shareholder distributions.
The move comes amid a broader push for corporate governance reform in Japan. Policymakers and regulators have been encouraging companies to improve capital efficiency, while investors increasingly demand justifications for maintaining sprawling non-core businesses.
Elliott’s position in Kansai Electric follows its successful engagement with Tokyo Gas. After building a more than 5% stake last year, the fund persuaded the energy giant to implement a mid-term plan featuring ¥120 billion in buybacks, a dividend hike, and ¥100 billion in property sales. Tokyo Gas shares have since outperformed the broader Topix, rising nearly 50%.
Targeting Kansai Electric represents a step into more politically charged territory. Utilities — especially those operating nuclear plants — have traditionally been resistant to activist pressure. Memories of failed campaigns linger, including the UK-based Children’s Investment Fund’s abandoned 2008 effort to overhaul J-Power after facing stiff opposition from management, shareholders, and government officials.
Kansai Electric operates more nuclear reactors than any other Japanese utility and is even weighing the construction of a new unit. Activists have generally steered clear of the sector since the Fukushima disaster in 2011, which reshaped Japan’s energy policy and heightened sensitivities around nuclear power.
Nonetheless, Elliott believes Kansai Electric could further enhance profitability by optimizing pricing for corporate customers and leveraging low-cost nuclear power to attract industrial investment to the Kansai region, which includes Osaka and Kyoto.
Kansai Electric has not commented directly on Elliott’s stake. A spokesperson told the Japan Times the company would “continue to sincerely communicate with shareholders.” Elliott declined to comment.
Whether the activist fund can replicate its Tokyo Gas playbook remains to be seen. Kansai’s shares had fallen 13% over the past year before the recent rally, including a steep 20% drop in November following an equity issuance. With Elliott now in the picture, investors will be watching closely to see if Japan’s governance reforms and Kansai’s vast property holdings create the conditions for another activist-driven turnaround.
By Charles Kennedy for Oilprice.com
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