Tepco Rises After Report on State-Fund Injection

Tokyo Electric Power Co. (9501) surged in Tokyo trading after a report said the company will accept 1 trillion yen ($13 billion) as part of an effective government takeover to save it from collapse after the Fukushima disaster.

Tepco rose as much as 12 percent, the most since Jan. 10, to 227 yen and was at 219 yen at 10:12 a.m. It’s the biggest gain among members of the Nikkei 225 Stock Average. Tepco is down about 90 percent since the day before an earthquake and tsunami caused reactor meltdowns at its Fukushima Dai-Ichi plant last March, wiping almost $40 billion off its market value.

“Tepco’s management has probably realized the company can’t carry on unless it accepts the government’s capital,” Takashi Aoki, who helps manage 120 billion yen at Tokyo-based Mizuho Asset Management Co., said by phone today. The utility’s management may have come to that realization after criticism from the government over its plans to raise electricity rates for households to ensure its survival, Aoki said.

The utility is in talks with the government-backed Nuclear Damage Liability Facilitation Fund on the size of the stake it will take, the Yomiuri newspaper reported today, citing unidentified people familiar with the matter. Tepco wants to keep the fund’s voting rights below 50 percent by using preferred shares while the government aims to obtain more than two-thirds, the Yomiuri said.

Radiation Release

The utility is relying on handouts from the government, which estimates Tepco faces 4.5 trillion yen in compensation claims by March next year. The radiation release from the meltdowns, the worst since Chernobyl, forced 160,000 people to flee their homes and damaged farming, forestry and fisheries businesses.

The compensation fund plans to inject 1 trillion yen in capital into Tepco during the year ending March 2013, the Nikkei newspaper reported today, without saying how it got the information. Banks will offer another 1 trillion yen in loans in June, the report said.

Tepco may return to profit in the year ending March 2014 and resume bond sales at a later date, the Nikkei reported. The estimates outlined in the plan assume the utility will raise electricity rates for households by 10 percent in October and restart reactors at its Kashiwazaki Kariwa nuclear plant after March next year, the Nikkei said.

Tepco is in talks with three Japanese banks and the government-backed fund to raise loans, two people with knowledge of the negotiations said earlier this month. The banks will lend 1 trillion yen to Tepco and 1 trillion yen to the fund, which would use the money to buy the utility’s shares, the people said.

The government is assuming the effective nationalization of the utility may last for as long as 10 years, the Asahi newspaper reported today, without citing anyone.

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

To contact the editor responsible for this story: Peter Langan at plangan@bloomberg.net

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