More big news out of Japan hit the uranium space on Wednesday when the country's Nuclear Regulation Authority (NRA) vouched for the safety of Shikoku Electric Power Company's (TSE:9507) Ikata 3 reactor. The safety stamp of approval is just one of three steps required before the NRA gives final approval for the reactor to restart, but it's definitely a move in the right direction. Ikata 3 is located at Shikoku Electric's Ikata nuclear power plant, and is only the fifth reactor across three power plants that has gained safety approval from the NRA.
Potential problems Even so, it's unlikely to be smooth sailing for Shikoku Electric moving forward. It will have to gain the approval of local authorities for the restart, and Ikata 3 will have to undergo operational checks; furthermore, it's likely that the company will face legal challenges similar to those encountered by Kansai Electric Power Company (TSE: 9503) and Kyushu Electric Power Company (TSE:9508), according to Rob Chang of Cantor Fitzgerald. The former, which owns the Takahama nuclear power plant, saw its plans to restart two reactors at the plant rejected by the courts last month due to safety concerns; that was the first injunction against a nuclear plant in Japan in 50 years. Reactor restarts at the latter's Sendai nuclear power plant had similar problems when local residents voiced safety concerns, though ultimately a Japanese court rejected the bid to block the reactors from reopening. Those opposed to the Ikata 3 reactor will get a chance to voice their concerns now that the NRA has given the safety nod. The process should take place over a one-month period. Timeline for restarts uncertain Shikoku Electric spokesman Shoichiro Mori told Bloomberg that the company plans to restart the reactor by the end of the year if it gains approval. Interestingly, Shikoku Electric has not submitted restart applications for the other two reactors at Ikata. One of them is nearing its lifetime operational capacity of 40 years and the other initially started operating in 1982.
All that said, the timeline for Japanese reactor restarts is far from certain. Cantor Fitzgerald is forecasting a mid-2016 restart for Ikata 3, and overall expects that two reactors will restart in 2015 — specifically the Sendai reactors — seven in 2016 and another 14 in 2017 as opposition to reactor restarts decreases.It's also worth noting that Chang doesn't see developments in Japan making much of a difference to the uranium space. "Cantor Fitzgerald Canada Research continues to hold the view that a violent upward move in the price of uranium is inevitable based on an unavoidable supply deficit occurring in 2020 where uranium supply from all sources (mine level and secondary) does not meet increased demand (particularly China)," he said in a research note. That's certainly good news for uranium-focused investors, and Wednesday's news from Shikoku Electric has been received well also. The company's share price rose 2.26 percent, to 1,857 yen, or US$15.31, following the announcement. Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. Related reading: TEPCO's Uranium Stockpile Sale Likely a 'One-Off' Move Good News from Japan Moves Uranium Stocks Japanese Court Blocks Reactor Restarts on Safety Concerns Japan's Third Nuclear Reactor Restart Coming Closer from Uranium Investing News