Tepco may be run by outside directors

Kyodo

Tokyo Electric Power Co. may have to let outside directors oversee its management if the beleaguered utility is effectively nationalized, sources said.

Discussions are also under way to set the size of the public bailout for the operator of the crippled Fukushima No. 1 nuclear plant at around ¥1 trillion, the sources said Thursday.

The public fund injection for Tepco is likely to result in the resignation of its top officials. President Toshio Nishizawa is likely to be replaced by an insider, while Chairman Tsunehisa Katsumata may be replaced by someone from outside Tepco, the sources said.

By installing business management experts at Tepco, the government aims to keep the utility under close scrutiny as it distributes trillions of yen in compensation to victims of the Fukushima nuclear disaster and calculates the cost of scrapping the ruined reactors at the plant.

Equipping firms with a panel of outside directors to improve management supervision and corporate governance is standard practice in the U.S.

The same system was used in 2003, when public funds were used to recapitalize Resona Holdings Inc.’s core subsidiary, effectively nationalizing the firm.

Tepco is likely to become insolvent without a public fund injection. Its fuel costs have also risen due to increased thermal power generation while its nuclear reactors remain offline.

A state-backed entity providing financial support to Tepco is seeking to acquire more than two-thirds of Tepco’s shares with voting rights by this summer.

How many shares the Nuclear Damage Liability Facilitation Fund acquires could be a difficult issue to settle, as some Tepco officials are reluctant to cede full control of the company.