Tepco May Face Insolvency Without Nuclear Reactors, Nikkei Says

Tokyo Electric Power Co. needs to restart nuclear reactors or raise electricity prices to avoid insolvency from Fukushima compensation costs of more than 4 trillion yen ($52 billion), Japanese media reported.

Shares in the utility known as Tepco fell 6.2 percent to close at 243 yen in Tokyo, the lowest since June 13. The stock, which dropped as much as 17 percent, was the biggest decliner among members of the Nikkei-225 (NKY) Stock Average.

A government panel investigating the utility’s finances made the estimate after examining nine scenarios in the next decade based on when reactors at the company’s Kashiwazaki Kariwa plant in Niigata prefecture come back online and how much electricity prices are increased, the Nikkei newspaper reported, without citing anyone.

The same panel estimated the cost of compensation to those affected by the Fukushima nuclear disaster will exceed 4 trillion yen, Kyodo News reported, without saying how it got the information.

No Japanese nuclear reactors have restarted since the March 11 earthquake and tsunami caused three reactor meltdowns at Tepco’s Fukushima Dai-Ichi nuclear station. Tepco won’t be allowed to raise electricity rates without cost cuts acceptable to the investigation panel, Yukio Edano, the head of the trade and industrial ministry, which regulates the electricity industry, said Sept. 16.

The compensation cost may be bigger than the estimate after a separate panel under the science and technology ministry decides on the costs Tepco should bear from decontamination and voluntary evacuation, Kyodo reported.

Tepco withdrew a plan to raise electricity rates by as much as 15 percents after receiving criticism from the panel members, Kyodo reported. The utility overestimated costs used to calculate tariffs for its customers for the decade since 1998, Kazuhiko Shimokobe, a lawyer and the chairman of the committee overseeing the company’s finances, said.

The Shimokobe committee will release its report in early October, the Nikkei reported.

To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editors responsible for this story: Teo Chian Wei at cwteo@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net

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