Tepco’s Choice of 36-Year Veteran Spurs Investor Calls for Government Role
Tokyo Electric Power Co.’s choice of a 36-year company veteran to resolve the worst nuclear crisis since Chernobyl and avert bankruptcy prompted calls for the government to take a more direct role in managing the utility.
Tepco, as the company is called, on May 20 picked Toshio Nishizawa, 60, to replace Masataka Shimizu, who resigned following a $15 billion loss, the biggest on record for a non- financial Japanese company. Nishizawa spent most of his career in corporate planning, a period that saw a series of scandals causing the departure of three previous presidents. Tepco shares fell 9 percent today after the loss.
“This is beyond what a company can bear,” said Yuuki Sakurai, president at Fukoku Capital Management Inc., which manages about $7.4 billion in Tokyo. “The government should be in charge, including compensation.”
Tepco has sought government aid to help cover compensation costs from the disaster at its Fukushima Dai-Ichi plant crippled by a magnitude-9 earthquake and tsunami on March 11. The utility, which had admitted to faking hundreds of safety reports in the past, was criticized by Prime Minister Naoto Kan for a slow response to the accident that caused radiation leaks and forced the evacuation of about 50,000 families.
“People want a scapegoat,” Sakurai said. “The biggest issue is not who the head of Tepco is. If we keep on discussing who is responsible for what, things won’t move along. Temporarily, the government should make the decisions and make the payments, then consider how much Tepco is responsible for.”
On March 15, an hour-long delay in Tepco informing the prime minister of a reactor building fire prompted Kan to demand of utility officials “What the hell is going on?” news agencies cited him as saying within earshot of reporters.
In parting comments on Friday, Shimizu, 66, said the culture at Tepco needs to change and become more “customer oriented.”
Shimizu, who was hospitalized for about a week for hypertension during the crisis, became president in June 2008 after a temblor shut Tepco’s biggest atomic plant at Kashiwazaki Kariwa and stoked mistrust among the public about nuclear safety.
Shimizu’s predecessor, Tsunehisa Katsumata, also became president amid controversy. He was promoted in 2002 after Hiroshi Araki and Nobuya Minami, chairman and president at that time, stepped down to take responsibility for more than 200 cases of falsified maintenance reports at its nuclear plants.
Nishizawa, Katsumata and Minami spent most of their careers at Tepco in the corporate planning department, spokesman Naoyuki Matsumoto said today. The section formulates overall strategy at the company including capital investment, Matsumoto said, adding those in department often deal with officials at the Ministry of Economy, Trade and Industry, which regulates power utilities.
Tepco’s board and shareholders will vote on the appointment of Nishizawa at meetings scheduled on June 28.
The stock fell 9 percent to 339 yen today in Tokyo after Tepco on May 20 announced a 1.1 trillion yen charge related to costs for the Fukushima accident in its earnings report for the year to March 31. The shares are down 84 percent since March 10. The cost of protecting Tepco’s debt rose to a record.
Nishizawa will be leading a drive to raise more than 600 billion yen from selling assets and complete a restructuring plan by the year-end. Costs for the disaster may reach as much as 11 trillion yen, according to Bank of America Merrill Lynch.
The government this month outlined a plan to shield Tepco from bankruptcy and a group of banks led by Sumitomo Mitsui Financial Group Inc. earlier advanced 2 trillion yen of emergency loans to the utility. Tepco will seek low-interest loans from Japanese private and state-run banks, Shimizu said at the earnings briefing.
“How we deal with Tepco is about what Japan should do about its energy policy and other power companies,” said Sakurai at Fukoku Capital. “Nationalizing all power companies could be one option. But to nationalize them, you need to be convinced nationalization is better than privatization.”
While there is a “strong case” for nationalization, nuclear energy has been at the heart of Japan’s national strategy for the last 50 years, said Jesper Koll, head of equity research at JPMorgan Chase & Co. in Tokyo.
“To change overnight, to change even in a couple of months is simply something that is unrealistic,” Koll said on Bloomberg Television.
Kan should call an election to resolve this issue and how the government will rebuild the Tohoku region north of Tokyo where more than 24,000 people were killed or are missing after the quake and tsunami, Koll said.
Tepco’s loss eclipsed the 812 billion yen deficit reported by Nippon Telegraph & Telephone Corp. in the year ended March 2002, according to data compiled by Bloomberg. Mizuho Financial Group Inc.’s 2.38 trillion yen loss the following year is the largest in Japan.
On May 15, more than two months after the Fukushima disaster, Tepco said conditions were worse than believed in reactor No. 1 where all the uranium fuel rods had melted. The utility reiterated last week the schedule on its so-called road map announced a month earlier to achieve cold shutdown of the three radiation-leaking reactors as early as October.
“I want Mr. Nishizawa to create a new management style that clarifies responsibility,” said Tetsuro Ii, chief executive of Tokyo-based Commons Asset Management. “The management style at Tepco is unique and tends to obscure responsibility.”
More than 10 million liters (2.6 million gallons) of radiation-contaminated water have leaked or been released into the sea, while millions of liters of tainted water is sloshing around basements and trenches at the station from leaking reactor vessels and piping.
Japan’s government in April raised the severity rating of the Fukushima crisis to the highest on an international scale, the same level as the Chernobyl disaster. The station, which has experienced hundreds of aftershocks since the March 11 quake, may release more radiation than Chernobyl before the crisis is contained, Tepco officials have said.
At the May 20 press conference introducing Nishizawa, he said taking over as president at the time of such an unprecedented crisis is a tremendous responsibility.
“I thought it was my destiny to deal with this, so I accepted it."
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