State takeover of Tepco could last at least 10 years

Nuclear redress body maps out financing plan for struggling utility

Kyodo

Tokyo Electric Power Co. would be effectively nationalized for at least 10 years and be expected to return to the black in fiscal 2013 under a plan being considered by the government-backed entity for funding nuclear disaster compensation, sources said.

The plan will likely be included in a special comprehensive business plan for Tepco to be compiled in March by the utility and the Nuclear Damage Liability Facilitation Fund, the sources said.

Tepco would remain a listed company, they added.

The business plan is intended to prevent the utility from becoming insolvent due to the massive costs stemming from the Fukushima No. 1 nuclear plant disaster, while making sure that compensation payments related to the accident are made in a timely fashion.

The injection of public funds that would effectively nationalize Tepco is expected to amount to about ¥1 trillion. The company will also try to improve its earnings by raising household electricity charges, possibly in the fall, as well as by reactivating its idled reactors in Niigata Prefecture starting in spring 2013.

Once Tepco starts to log net profits, the company is likely to be urged to repay the financial assistance it has received from the Nuclear Damage Liability Facilitation Fund, using half of its pretax profits every year, the sources said.

The funding entity receives money from special government bonds and contributions from other utilities with nuclear plants.

Banks would effectively reschedule the repayment deadline for around ¥2 trillion in emergency loans extended to Tepco shortly after the nuclear crisis erupted in March.

They would also be expected to provide an additional ¥1 trillion in loans to help Tepco boost its financial standing, the sources said.

In hopes of the virtual nationalization ending as early as March 2022, the utility would set aside a certain portion of its profits to repay the ¥1 trillion in public funds. But if its financial situation deteriorates significantly, Tepco may be delisted, the sources said.

Whether it will return to the black as expected remains uncertain because raising household electricity rates would trigger a backlash from users, while prefectural and local governments may be reluctant to authorize a restart of Tepco’s reactors amid public concerns over the safety of nuclear power.

Besides the Fukushima No. 1 plant and the adjacent Fukushima No. 2 plant, both affected by the March 11 disasters, the utility has seven reactors at the Kashiwazaki-Kariwa plant in Niigata.

The No. 5 and 6 reactors in Niigata are the only ones still in operation, but they also will be shut down for regular maintenance and inspections by March.

If Tepco stays mired in the red, the firm may face difficulty buying fuel for its nonnuclear power plants, which could disrupt the electricity supply in its service area.