Tokyo Electric Power Co. (9501) wants to borrow 2 trillion yen ($20 billion) for new power plants and overseas operations as it maps a return to profitability after the Fukushima nuclear disaster, the Asahi newspaper reported.
The request to banks including Mitsubishi UFJ Financial Group Inc. (8306), Sumitomo Mitsui Financial Group Inc. (8316), Mizuho Financial Group Inc. (8411) and the government-owned Development Bank of Japan Inc. is in addition to 500 billion yen already being sought from the creditors, the Asahi reported, without saying where it got the information.
The loan is being sought as the nation’s biggest utility, known as Tepco, devises a business plan that will probably call for greater reliance on thermal fuels due to its dwindling nuclear fleet. A further 2 trillion yen in borrowing would be almost double the money the government injected into Tepco last year to cover costs from the March 2011 nuclear disaster.
Tepco and its majority owner, the publicly funded Nuclear Damage Liability Facilitation Fund, plan to use the additional credit to replace aging thermal plants and expand overseas electricity operations, the Asahi reported.
Two people at two banks involved in the discussions who asked not to be identified confirmed that their companies had been contacted about the additional loan. One of the people said his bank was told the total size of the loan being sought may be about 2 trillion yen.
Tepco spokeswoman Mayumi Yoshida declined to comment. Taishi Kono, a spokesman for the liability fund, didn’t immediately return a call.
The details shine some light on Tepco’s intentions as it revises the business plan under which it has operated since May 2012, when it received a government bailout after the temblor and tsunami 14 months earlier crippled reactors at the utility’s Fukushima Dai-Ichi plant northeast of Tokyo.
The request is separate from a 1.07 trillion yen finance plan agreed to during the bailout. Under that pact, the utility is also seeking to secure 300 billion yen in new loans and 200 billion yen to refinance existing debt by year-end.
New thermal plants will be needed as some of Tepco’s existing gas-, coal-, and oil-burning generators become too old to use, Hiroshi Takahashi, a research fellow at the Fujitsu Research Institute, said today by phone. The utility’s need for thermal capacity has also been intensified by the idling of its nuclear fleet, he said.
Tepco is considering a government request to decommission the two reactors at the Dai-Ichi plant yet to be written off, along with the four reactors at its Fukushima Dai-Ni plant. It has applied for safety checks for two reactors of the seven at its remaining Kashiwazaki-Kariwa plant in Niigata prefecture.
“It is highly unlikely that all of those seven reactors will be in operation in the near future,” Takahashi said. “They need a certain volume of capacity at thermal power stations.”
Tepco was seeking funds to invest in overseas electricity generation because it identified the sector as a growth area, the Asahi reported. Takahashi said he was skeptical the utility would be able to spend much money abroad, given domestic needs.
“That’s an important strategy so they include that strategy in their plan, but they won’t be able to spend so much money on foreign business development,” he said. “They have many problems in Japan.”
The utility has the equivalent of 4.2 trillion yen in bonds outstanding, including 659 billion yen in securities maturing next year, according to data compiled by Bloomberg.
Tepco last sold bonds publicly in September 2010 in a 30 billion yen offering paying an interest rate of 1.155 percent. The bonds, maturing in 2020, have lost 16 percent since issue and traded at 83.87 on Nov. 20. The yield premium investors demand to hold the notes has risen to 353 basis points over government debt from 7 at the time of sale.
The cost to insure Tokyo Electric’s debt has fallen 84 basis points this year to 363.4 basis points as of Nov. 20, and is down from a high of 1,762.2 in October 2011, according to CMA data. The latest price is signaling a 25 percent chance of default by December 2018, according to Bloomberg-compiled data.
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