Tokyo Electric Power Co. and nine other Japanese electricity companies decided not to issue any debt for the first time in four years and four months in April because they didn’t think they would be able to raise funds due to the nuclear power plant crisis in Fukushima Prefecture.
Their creditworthiness was called into question after Tokyo Electric, known as Tepco, was saddled with a huge but yet-to-be-determined compensation bill for damage from its crippled Fukushima No. 1 power plant.
The utilities’ share prices have plunged since the March 11 quake and tsunami hit the plant and the northeast coastline.
Analysts say they may have to give up issuing bonds in May as well, since the government is requesting that Chubu Electric Power Co. halt operations at the controversial Hamaoka nuclear power plant due to quake-related safety concerns.
Utility bonds are considered benchmarks in the Japanese debt market, which was worth around ¥61 trillion as of March 31, according to I-N Information Systems Ltd., a private data service company. The 10 utilities accounted for around 20 percent of the market, with Tepco was the biggest debt issuer at around ¥4.8 trillion in outstanding bonds.
Debt issuance has been a major financing source for these companies because they can attract funds at lower costs than taking out loans from commercial banks.
The utilities had enjoyed credit ratings as strong as the central government’s because their stability was underpinned by their legally sanctioned status as monopolies in regional markets.
But Tepco’s creditworthiness has been downgraded sharply since the disaster hit the Fukushima atomic plant. Credit rating agency Moody’s Japan K.K. cut its long-term issuer rating on Tepco by five notches from the prequake level to Baa-1, near the bottom of the investment grade barrel.
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