Japanese Goverment to Oversee Tepco as Condition for State Financial Help
Tokyo Electric Power Co. will be monitored by the government as a condition for state financial aid to ensure full compensation will be paid to those affected by the world’s worst nuclear disaster in 25 years.
Tokyo Electric accepts conditions set by the government including unlimited liability on payments to those affected by the accident at its Fukushima Dai-Ichi nuclear plant, according to a statement today. Japan outlined the monitoring plan yesterday after Tokyo Electric Chairman Tsunehisa Katsumata and President Masataka Shimizu met government officials to seek financial help.
The plan for state support comes after Chief Cabinet Secretary Yukio Edano said the government isn’t considering nationalizing the utility. Bank of America Corp.’s Merrill Lynch estimates Tepco may face claims of 11 trillion yen ($136 billion) from the worst nuclear crisis since Chernobyl.
“It seemed plain in March that if and when Tepco ran out of money, that it would then be supported by the government,” Ben Wedmore, a Tokyo-based analyst at MF Global FXA Securities Ltd., said by phone today. “It is essential that they do so. My guess is the current plans have the debt and bondholders first and foremost in the government’s mind after the taxpayer.”
Trade Minister Kaieda said today Japan’s Cabinet will decide this week on the plan to support the compensation payments from Tepco, as the company is called.
The utility’s shares rose 8.5 percent to 525 yen in Tokyo. The stock has fallen about 77 percent since the March 11 earthquake and tsunami left more than 24,000 people dead or missing and knocked out power and cooling systems at the Fukushima Dai-Ichi station.
Tepco has to work with a government-created panel that will “investigate the state of the utility’s finances, so that a fair assessment can be made of the value of its assets, and a thorough review of its spending can be carried out,” Kaieda wrote in yesterday’s letter.
The government will conduct due diligence through an institution that it will establish to monitor payments from Tepco to meet damage claims, said a Japanese government official, who asked not to be identified because the discussions aren’t public.
If Tepco runs short of funds, options for financing include the new entity buying preferred shares from Tepco and issuing the company with so-called delivery bonds, which can be converted to cash at any time, the government official said.
The government can also seek cooperation from other electric companies in case of a fund shortage at Tepco, the government official said. The payouts may take several decades and the government doesn’t know how much money Tepco will need as the nuclear crisis hasn’t been resolved, the official said.
Tepco will probably report a loss of more than 1 trillion yen for the fiscal year that ended on March 31, the Nikkei newspaper reported today. The company earlier forecast profit for the period would be 110 billion yen.
It delayed releasing an earnings statement after the disaster struck. Tepco hasn’t decided when it will release its earnings, Naoyuki Matsumoto, a spokesman at the utility, said by phone today.
The company will write down 480 billion in deferred tax assets and book a charge of 600 billion yen to decommission the damaged reactors at the Fukushima plant, the Nikkei said. Tepco is also planning 500 billion yen of asset sales, according the Nikkei report.
The other conditions stipulated in Kaieda’s letter include requiring Tepco to stabilize the situation at Fukushima where radiation is still spewing into the air and the company is using fire hoses, pumps and water cannons to cool reactors and spent fuel ponds. It must also improve the living conditions and safety measures for engineers working on the crippled plant.
Tepco also must maintain stable supplies of electricity and ensure its power stations are safe, the letter said. Another condition requires Tepco to “rationalize” its management and cut spending.
Katsumata and Shimizu will take no salaries, extending pay cuts announced last month, they told reporters yesterday.
The utility on April 26 started making initial payments of 1 million yen per household affected by the disaster on April 26, spokesman Takeo Iwamoto said yesterday. It’s making these payments to about 50,000 families forced to evacuate the area around the plant.
Prime Minister Naoto Kan said yesterday he will reconsider Japan’s plan to increase its dependence on nuclear energy. The government will review a plan unveiled in June that called for building nine atomic power plants by 2020 and more than 14 by 2030, increasing the share of nuclear energy to 50 percent from the current 30 percent.
Under the plan, Tepco was to build two more reactors at the Fukushima Dai-Ichi plant.
“We should start from scratch,” Kan said at a press conference in Tokyo. “We will need to make nuclear energy safer and more strongly promote renewable energy.”
Kan also said he will give up his salary as prime minister from June until the nuclear crisis is contained.
To contact the editor responsible for this story: Amit Prakash at firstname.lastname@example.org -0- May/11/ :23 GMT