Tokyo: Tokyo Electric Power Co requested one trillion yen (Dh44 billion, $12 billion) of public funds to avert collapse, paving the way for the government to take control of what once was the world's biggest private utility.
The company known as Tepco also made a request to a government-backed fund for 845.9 billion yen in extra aid that will be used to compensate people affected by the Fukushima disaster, President Toshio Nishizawa said at a news briefing yesterday. The utility may face insolvency if its capital keeps falling, he said.
Bailout
The government is preparing a Tepco bailout package of as much as 11 trillion yen, the largest in Japan since the rescue of the banking industry in the 1990s, after last year's quake and tsunami crippled the Fukushima Daiichi nuclear station and forced about 160,000 people to flee their homes. The capital injection, if approved by the government, would effectively nationalise Tepco and lead to a possible reform of Japan's electricity industry now monopolised by regional utilities.
"Tepco would become the touchstone of the government's liberalisation of the industry," Yuji Nishiyama, a Tokyo-based analyst at Credit Suisse Group AG, said yesterday before the announcement. "If the government seriously wants to reform the power industry, it needs to hold two-thirds of Tepco's voting rights."
Compensation payouts may rise to 2.55 trillion yen, up from a previous estimate of 1.7 trillion yen, Tepco said in a statement yesterday. The company requested the additional compensation aid after a government panel updated guidelines on March 16. The government approved Tepco's requests for 890.9 billion yen in November and 689.4 billion yen in February.
Business plan
The request for the capital infusion in public funds and the additional state aid is expected to be incorporated into a business plan, including measures to restructure the company, to be drawn up by Tepco and the government-backed fund.
Nationalising Tepco may portend a break-up of Japan's 10 regional power monopolies that ring up combined sales of $190 billion a year to produce, transmit and distribute electricity, according to data compiled by Bloomberg. Breaking off Tepco's transmission business from power generation would end its monopoly in Tokyo and may provide a model for the rest of the country, said Penn Bowers, who tracks utilities at CLSA Asia-Pacific Markets.
Tepco and the nuclear damage fund originally aimed to have the business plan approved by March 31 as they are concerned a delay will cause further downgrades in Tepco's long-term credit rating, two people familiar with the negotiations said earlier this month.
The company and the compensation fund are still working on drafting the business plan and haven't decided when to submit the plan to the government, Soichi Yamamoto, an official of the fund, said by phone yesterday.
Compensation Claims
Bailout funds for Tepco will be funnelled through the government's Nuclear Damage Liability Facilitation Fund. Kazuhiko Shimokobe, the head of the steering committee of the fund, was expected to meet reporters later yesterday to comment on Tepco's request for aid.
Credit-default swaps insuring the debt of Tepco against default fell 45.5 basis points to 525 basis points as of 2.36pm in Tokyo, according to prices from Citigroup Inc. They closed little changed on Wednesday, having dropped 337 basis points this year, according to prices from data provider CMA, which is owned by CME Group Inc.
