(Bloomberg) -- Kansai Electric Power Co. shares saw their biggest drop in at least 50 years after the Japanese utility said it plans to raise as much as ¥504.9 billion ($3.2 billion) from a share sale, fueling concerns about earnings dilution.
Kansai Electric tumbled 18%, its steepest fall since September 1974, when Bloomberg data first became available. A gauge of power companies led the drop on the Topix index, as peers sank on worries they may follow suit.
“It’s a bit of a surprise that the company decided to take the form of share sale” to raise capital, said Kazuhiro Sasaki, head of research at Phillip Securities Japan Ltd. It could have done that through other means like debt issuance if it’s to fund things like infrastructure for decarbonization, he said.
Kansai Electric’s announcement was not well flagged, Travis Lundy, an analyst at Quiddity Partners, wrote on Smartkarma. Its dividend isn’t high enough to make the sale attractive, he wrote.
Kansai Electric will sell about 148.3 million new shares as well as 45.7 million treasury shares to the public, according to a filing made to Japan’s finance ministry on Wednesday. The funds raised will go toward improving power generation efficiency and decarbonization, as well as investments into businesses including data center, real estate and renewable energy.
Frequent issuers such as utilities are seeing funding costs rise, with Chugoku Electric Power Co. and Tohoku Electric Power Co. paying wider spreads to sell yen bonds. Yields have been rising in Japan as the central bank raised interest rates twice this year and speculation is growing it will increase rates again in the months ahead.
Other power companies are being dragged down on concern they may also issue shares, Phillip Securities’s Sasaki said.
(Updates with analyst commentary)
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