OSAKA -- Kansai Electric Power Co. and Osaka Gas Co. have said they planned to arrange a "weather derivative" contract under which weather risks on profits are to be leveled between the firms.
Under the planned contract, announced Tuesday, when Kepco generates greater profits than expected in a scorching summer due to increased power consumption for air conditioners, it will pass on part of the profits to Osaka Gas, which usually sees lower gas demand when temperatures are high.
The two companies will do the opposite in cool summers that undermine the power firm's profits while boosting those at the gas company.
Tokyo Electric Power Co. and Tokyo Gas Co. signed a similar contract for this summer.
Kepco and Osaka Gas said they will examine the feasibility of the derivative contract at a new company they will set up in January.
The new firm, in which the companies will invest 5 million yen each, will also examine the feasibility of various other joint projects, they said.
Those projects will include recycling industrial waste and environmental protection, they added.