The embattled Tokyo Electric Power Co. intends to operate key divisions more independently and appoint most of its directors from outside the company as part of reform measures to win state support.
The strategy has been included in TEPCO’s comprehensive special business plan to be submitted to the industry minister as a precondition for government backing, sources said Feb. 29.
TEPCO and the Nuclear Damage Liability Facilitation Fund, which plans to invest about 1 trillion yen ($12.4 billion) in public funds in the utility, will finalize the business plan this month.
But the battle over TEPCO’s ownership is still raging, with industry minister Yukio Edano demanding more than two-thirds of voting rights and TEPCO adamantly refusing to agree.
Financial institutions, led by the government-affiliated Development Bank of Japan, have decided to provide 1.07 trillion yen in loans and credit lines to TEPCO, sources said.
TEPCO, reeling from the reactor meltdowns at its Fukushima No. 1 nuclear power plant, has been seeking support from financial institutions as well as public investment to bolster its capital base.
The plan calls for TEPCO to set up what essentially amounts to three separate entities under its umbrella to be managed on a financially stand-alone basis to enhance efficiency, the sources said.
The three entities will be each responsible for: fuel procurement and thermal power generation; power transmission and distribution; and power retailing.
The plan calls for TEPCO to substantially reduce the number of directors from the current 16, the sources said. More than half will be brought in from outside the utility to improve management transparency.
The government is looking for an outsider with a private-sector background who can serve as chairman, the sources said.
Thermal power generation has taken on heightened importance as nuclear power plants have remained shut down after the Fukushima nuclear disaster, which has threatened TEPCO's existence.
The utility plans to combine its thermal power generation division with the fuel procurement division to cut waste and scale back planned increases in electricity rates.
TEPCO’s high fuel costs have been sharply criticized.
The company plans to cut costs by purchasing liquefied natural gas and crude oil with other utilities and sharing LNG facilities and pipelines with gas and other companies.
In principle, TEPCO does not plan to build new thermal power plants. When it needs additional capacity, it will hold an auction to choose a supplier that builds a new power plant, the sources said.
The financial institutions will extend their support on condition that TEPCO is able to stabilize its operations after its capital is bolstered by public investment and it gets nuclear power plants back on line and raises electricity charges.
Eight banks and four life insurance companies will provide an additional 500 billion yen in loans between July and 2013, sources said. They will also set up credit lines that will allow TEPCO to borrow 400 billion yen if it becomes necessary.
TEPCO will receive some of the funds by having these financial institutions underwrite its bonds.
According to plans to be conveyed to TEPCO by March 7, the Development Bank of Japan is expected to shoulder 500 billion yen of the 900 billion yen in new loans and credit lines, the sources said.
Three megabanks--Sumitomo Mitsui Banking Corp., Mizuho Corporate Bank and the Bank of Tokyo-Mitsubishi UFJ--will provide a combined 200 billion yen. The remaining 200 billion yen will come from four trust banks and the life insurers.
In addition, financial institutions will refinance 170 billion yen in TEPCO’s outstanding loans.
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