TEPCO considers public fund injection 'if conditions are right'

January 26, 2012

Executives of embattled Tokyo Electric Power Co. appear willing to accept a public injection of up to 1 trillion yen ($12.8 billion)—as long as they can maintain management control of the utility.

The expected huge compensation payments for the accident at TEPCO’s Fukushima No. 1 nuclear power plant as well as expenses to decommission the reactors threaten to create excess liabilities at the company.

Sources said the Nuclear Damage Liability Facilitation Fund is considering providing TEPCO as much as 1 trillion yen in capital, consisting of contributions from the central government and electric power companies.

However, TEPCO executives are negotiating with government officials about what form the capital injection will take because they do not want the fund to obtain a majority stake in the utility.

Under the fund’s proposal, TEPCO's market capitalization is estimated at about 350 billion yen. If 1 trillion yen is injected, the fund would hold more than two-thirds of the outstanding shares in TEPCO.

Fund officials are seeking a majority stake of shares with voting rights to convert TEPCO into a virtual nationalized entity. Such a move would likely be included in the comprehensive special business plan to be compiled for TEPCO in March.

TEPCO officials would rather have the fund possess shares without voting rights.

"We are in the middle of negotiations,” a TEPCO executive told The Asahi Shimbun on Jan. 26. “We will accept the proposal if the conditions are right."

TEPCO is being hammered financially from the expenses needed to bring the Fukushima nuclear accident under control as well as rising costs to buy fuel for the shift to thermal power plants.

The utility is expected to record an unconsolidated net loss of about 575 billion yen for the fiscal year that ends in March. Its net assets, excluding loans, will drop from 2.6 trillion yen held before the nuclear accident to 700 billion yen.

The added expenses for compensation claims and decommissioning of the reactors at the Fukushima plant will force TEPCO into a state of excess liabilities unless it receives a capital injection.

Fund officials are expected to ask financial institutions to provide about 1 trillion yen in additional loans when the fund injects the 1 trillion yen in additional capital.

Officials are seeking to stabilize TEPCO's management status by the fiscal year ending in March 2017 through electricity rate hikes and a resumption of operations at nuclear plants. Fund officials are also hoping to end the nationalization of TEPCO in about 10 years by selling off the stock once the utility's management has been stabilized.

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TEPCO is considering accepting an injection of 1 trillion yen from the government. (Louis Templado)

TEPCO is considering accepting an injection of 1 trillion yen from the government. (Louis Templado)

  • TEPCO is considering accepting an injection of 1 trillion yen from the government. (Louis Templado)

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