Tepco Bailout Largest in Japan Since Rescue of Banks

Tokyo Electric Power Co. (9501) is set to receive a government bailout that may cost as much as 11 trillion yen ($137 billion) after the Fukushima nuclear disaster, the largest in Japan since the rescue of the banking industry in the 1990s.

Japan’s government included 2 trillion yen in this year’s budget for the Nuclear Damage Liability Facilitation Fund, the bailout vehicle for the utility known as Tepco. Part of that allocation can be used for the purchase of a stake in Tepco being considered by the government. The government plans to budget 4 trillion yen in the next fiscal year and has issued 5 trillion yen of so called delivery bonds, which the state fund can cash in for financial aid to Tepco. The funds redeemed can only be used to compensate those affected by the disaster.

The utility may have to pay 4.5 trillion yen by March next year to compensate people who lost their homes and livelihoods because of radiation released from the Fukushima Dai-Ichi nuclear station. Decommissioning costs for the three reactors that had meltdowns after the March 11 earthquake and tsunami may run to 1.15 trillion yen, according to a government estimate. Extra fuel costs this fiscal year may total 760 billion yen, Tepco has said.

Japan pumped 12.8 trillion yen of public funds into its banks since 1998 after the implosion of the asset-inflated bubble economy left them overloaded with bad loans, according to data from the Deposit Insurance Corp. of Japan. Resona Holdings Inc. (8308) was the biggest bank-recipient of taxpayer aid, getting 3.1 trillion yen since 1999, the figures show.

The following is a table outlining government support for Tepco and the company’s potential liabilities and debt.

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Budget for the Nuclear Damage Liability Facilitation Fund
 Delivery bonds         5 trillion yen
 Loan guarantee line    2 trillion yen (fiscal 2011 budget)
                        4 trillion yen (fiscal 2012 budget plan)
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Approved government aid from the delivery bonds
 Nov. 4                 890.9 billion yen
 Feb. 13                689.4 billion yen

Other government support
 Nov. 22                120 billion yen (insurance payment)
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Tepco’s potential liabilities
 Compensation (by March 2013)
                        4.5 trillion yen
 Decommissioning costs (initial)
                        1.15 trillion yen
 Extra fuel costs (year to March 31)
                        760 billion yen
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Tepco’s debt
 Outstanding bonds      3.83 trillion yen (Dec. 31)
 Long-term borrowings   3.41 trillion yen (Sept. 30)
 Short-term borrowings  404 billion yen (Sept. 30)

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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