Tepco President Resigns After Record $15 Billion Loss From Nuclear Crisis
Tokyo Electric Power Co.’s president was forced to resign as the Fukushima nuclear crisis triggered a loss of 1.25 trillion yen ($15 billion), the biggest for a non- financial Japanese company.
The utility known as Tepco said Managing Director Toshio Nishizawa, 60, who has been with the company 36 years, will replace Masataka Shimizu, 66, as president. He’ll lead a drive to raise 600 billion yen from selling assets and complete a restructuring plan by the end of the year. The utility booked a 1.1 trillion yen charge related to costs for the worst nuclear crisis since Chernobyl in 1986.
Tepco has lost 2.9 trillion yen of its market value since the March 11 quake and tsunami crippled its Dai-Ichi nuclear plant north of Tokyo. Costs for the disaster may reach as much as 11 trillion yen, according to Bank of America Merrill Lynch. The government may need to take control, said an asset manager.
“Without state support, it will be difficult for Tepco to remain as a publicly-traded company,” said Junichi Misawa, head of equity investment at Tokyo-based STB Asset Management Co., which oversees about $17 billion. “This loss can’t be a one-off event for this year as it will have to continue paying compensation.”
Shares in the company, which reported a 133.8 billion yen profit in the year ended March 31, 2010, rose 2.5 percent to 367 yen today. The stock is down 83 percent since the day before the quake and tsunami.
Tepco’s loss eclipsed the 812 billion yen deficit reported by Nippon Telegraph & Telephone Corp. in the year ended March 2002, according to data compiled by Bloomberg. Mizuho Financial Group Inc. (8411)’s 2.38 trillion yen loss the following year is the largest in Japan.
For the year ended March 31, 2010, Tepco had total capital of 2.5 trillion yen, indicating today’s loss will wipe out half of its capital, according to data compiled by Bloomberg.
“Given the government has said it wants the company to stay listed, Tepco will probably beef up its equity capital,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “Common practice would be for the company to issue preferred shares to the government.”
Tepco booked a charge of 458 billion yen to decommission four reactors at the station, maintain the shutdown at the remaining two and for scrapping plans to build more units.
Japanese banks are resisting government calls for lenders to support Tokyo Electric by forgiving loans or easing interest charges. Masayuki Oku, chairman of the Japanese Bankers Association, said yesterday that banks aren’t considering writing off or cutting interest payments on existing loans.
“The government and Tepco should solve the issue by sharing the burden,” Oku told reporters in Tokyo. Atsushi Saito, head of the Tokyo Stock Exchange, said May 17 that Edano’s remarks “invite worldwide confusion” as Tepco “is a publicly traded company, not a government one.”
Chief Cabinet Secretary Yukio Edano today clarified remarks he made last week suggesting lenders may need to waive loans made to Tepco before the quake, comments that caused bank stocks to fall.
“I was pointing to the need to gain public understanding for the plan rather than focusing on the responsibility of lenders,” he said, referring to the utility’s arrangements for compensating those affected by the nuclear accident.
On May 15, more than two months after the disaster at the Fukushima Dai-Ichi plant, Tepco said conditions were worse than believed in reactor No. 1 where all the uranium fuel rods had melted.
Radiation leaks forcing about 50,000 families near the plant to evacuate and more than 10 million liters (2.6 million gallons) of radiation-contaminated water have leaked or been released into the sea.
Millions of liters of radiated water is sloshing around basements and trenches at the station from leaking reactor vessels and piping.
Japan’s government in April raised the severity rating of the Fukushima crisis to the highest on an international scale, the same level as the Chernobyl disaster.
The station, which has experienced hundreds of aftershocks since the main quake, may release more radiation than Chernobyl before the crisis is contained, Tepco officials have said.
“You can’t touch Tokyo Electric stock right now. It is simply too difficult to assess the company until we know details of the turnaround plan, including compensation,” said Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co.
“The nuclear plant situation is far from being resolved.”
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