Japan intends to take control of Tokyo Electric Power Co. in return for bailing out the beleaguered utility, following a model it adopted to rescue the nation’s fifth-biggest bank.
The government will inject ¥1 trillion ($12 billion) capital as early as July in return for stock with more than 50 percent of voting rights in the utility known as Tepco, the Nikkei newspaper said Saturday, without giving a source of the information. Japan will have an option to raise its voting rights to at least two-thirds, Nikkei reported.
Tepco has been on government life-support since last year’s earthquake and tsunami wrecked its Fukushima No. 1 nuclear station, causing reactor meltdowns and forcing about 160,000 people to evacuate from nearby towns and villages. Trade and industry minister Yukio Edano has said Japan will adopt the model used to rescue Resona Holdings Inc. in 2003, when it pumped almost ¥2 trillion into the bank in return for 70 percent voting rights.
“This is the last chance to restore Tepco,” Kazuhiko Shimokobe, a corporate turnaround lawyer who will be the next chairman of Tepco, told reporters Saturday. “Tepco employees should take to heart that they can’t restore public confidence in the company without reforms.”
Edano has cited the bank bailout as a success, saying in February it’s been “widely agreed that Resona has returned to health.” The bank recorded a profit for the 12 months to March 2005 after cumulative losses of ¥3.4 trillion in the previous three years, and remained profitable throughout the global financial crisis.
The utility and the government-backed Nuclear Damage Liability Facilitation Fund submitted the business plan that outlines restructuring steps including ¥1 trillion in capital injection to the government on Friday.
The business plan will be released “as soon as the trade and industry minister approves it,” Shimokobe said.
The plan is premised on an increase in electricity rates for households by about 10 percent from July and restart of the Kashiwazaki Kariwa nuclear plant in the year starting April 2013, the Nikkei newspaper reported.
“We need to work on raising electricity rates for households at appropriate timing” to ensure stable power supply, Shimokobe said. He didn’t elaborate on the timing.
Nationalization of Tepco would pave the way for the government to restructure a power industry monopolized by regional utilities, and possibly break up generation and transmission networks to allow more competition.
Shimokobe, who has been heading the compensation fund set up to rescue the utility, agreed to serve as chairman after the government failed to find a business leader willing to run Tepco. Someone inside the company will be promoted to replace President Toshio Nishizawa, Nikkei reported.
The utility will clarify management’s responsibility when it discloses its earnings in May, Nishizawa said Saturday. He declined to comment on details of the business plan.