• Bloomberg


Tokyo Electric Power Co., which faces damages of at least ¥4.5 trillion for the Fukushima nuclear disaster, may be consigned to a future as a “zombie company” requiring constant government funding.

The estimate is contained in a report from a panel reviewing Tepco’s finances, the daily Yomiuri said Friday. The government is trying to avert the bankruptcy of a utility that supplies power to 29 million customers as it pays for the worst nuclear disaster in 25 years.

“Significant financial resources for compensation can be extracted if they liquidate Tepco,” said Yoshimi Watanabe, head of Your Party. “The government isn’t doing this. It’s simply writing a check for the compensation body, to be funded by higher electricity bills and taxes. Tepco will ultimately be a zombie company.”

The term zombie company is a throwback to the 1990s, when the asset bubble burst and large corporations avoided bankruptcy by being kept alive with loans from banks that also held their stock. Tepco, which has reported losses of ¥1.8 trillion, must also find funds to pay for decommissioning and cleanup costs after the March 11 earthquake and tsunami caused three reactor meltdowns at its Fukushima No. 1 power plant.

The oversight panel is due to present its report next week to the Cabinet of Prime Minister Yoshihiko Noda and the findings will form the basis of a plan to be drafted by Tepco and the Nuclear Damage Compensation Facilitation Corp. The body opened its offices Monday after being created by an act of the Diet in August with ¥2 trillion in funds.

The plan will provide for compensating 160,000 residents who fled from the radioactive fallout from the plant, along with fishery, forestry and farming businesses damaged by the accident. It will also pave the way for the government to beef up Tepco’s finances by issuing government bonds the company can immediately redeem or through capital injections.

Tepco may face as much as ¥11 trillion in compensation claims, Bank of America Corp. said in March. Shares of the company are down nearly 90 percent since the day before the disaster.

To qualify for the government support, Tepco must carry out “thorough reforms,” Takehiko Sugiyama, the head of the compensation corporation, said at the opening of its headquarters in central Tokyo on Monday.

These include cutting 7,400 employees, or 14 percent of its workforce, the Yomiuri said Thursday, citing a draft of the report. The compensation corporation may also take over the utility, the paper said.

Tepco’s management may be forced to step down and pensions will be cut, according to the Nikkei newspaper. Beyond compensation payments, the utility may have a funding shortage of ¥8.3 trillion over 10 years if it cannot raise power rates and restart idled nuclear reactors.

Decommissioning the four damaged reactors at Fukushima No. 1, one of which was idled before the disaster struck, will cost ¥1.1 trillion, the Nikkei said.

The cleanup bill may rise depending on the cost of decontaminating farmland and residential areas near the plant, some of which may be uninhabitable for decades.

Tepco in May reported a full-year loss of ¥1.2 trillion. That was followed by a quarterly loss of ¥572 billion announced in August.

It got ¥2 trillion in emergency loans from domestic banks in late March, funds that it mostly used to redeem bonds coming due.

Tepco should be put into bankruptcy protection, said Shigeaki Koga, a former senior bureaucrat at the Ministry of Economy, Trade and Industry, which both regulated Tepco and promoted nuclear power.

Koga, who wrote a book this year criticizing the concentration of power in the bureaucracy, in May wrote a 16-point plan for resolving the crisis, which included writedowns on loans. He recommended that Tepco’s power generation and transmission units be separated.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.