Tepco Under State Control as Government Gets Shares for Cash
Tokyo Electric Power Co. (9501) received 1 trillion yen ($12.8 billion) from the government in return for giving up corporate control to the state after the Fukushima disaster left the utility on the brink of bankruptcy.
The company, which supplies electricity to about 30 million customers in the Tokyo metropolitan area, is under “temporary public control” as the government-backed Nuclear Damage Liability Facilitation Fund obtained preferred shares, President Naomi Hirose said today in a statement.
Known as Tepco, the utility has been on government support with taxpayers funds since the March 11, 2011 quake and tsunami crippled the Fukushima Dai-Ichi nuclear station, causing three meltdowns and radiation leaks that forced about 160,000 people to evacuate.
“We are sorry and take very seriously” that taxpayers will have to bear the costs of the capital infusion, Hirose said in the statement. “We will do our best to become ‘a newborn Tepco.’”
Decommissioning costs for the three melted reactor cores may reach 1.15 trillion yen, according to a government estimate in October. In May, Tepco said compensation payments to those affected by the disaster may total 2.55 trillion yen. The utility and the bailout fund said in a turnaround plan they can’t estimate the costs to clean up neighboring contaminated areas around the plant.
“I can’t imagine how much Tepco will need for clean-up and decommissioning” at Fukushima, Hirofumi Kawachi, a Tokyo-based energy analyst at Mizuho Investors Securities Co., said today by phone. “Tepco may need more government funds.”
Tepco reported a net loss of 782 billion yen last fiscal year which followed a 1.25 trillion yen deficit in the year ended March 2011 due to costs from the Fukushima disaster. Shares in Tepco have plunged about 94 percent since the day before the disaster in March 2011.
Ownership of the preferred shares give the state-owned compensation fund 50.11 percent voting rights, as announced earlier, spokesman Masateru Araki said today by phone.
Japan’s government approved the effective nationalization of Tepco in May. Last week, the state endorsed the utility’s request to raise electricity rates for households and small users by an average of 8.46 percent.
As the government trimmed Tepco’s plan to raise household tariffs by 10.28 percent, the company’s annual revenue will be about 84 billion yen lower than it expected, according to Tepco. The lower rate may delay the utility’s goal to return to profit in the year ending March 2014.
The rate increase and the government’s investment are milestones required by banks to extend additional loans to Tepco, which was once the world’s largest private power supplier, according to the book “The Nuclear Barons” by Peter Pringle and James Spigelman.
Tepco expects to receive additional bank loans “soon,” spokesman Araki said. He declined to be more specific on the timing.
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