On July 22, Tokyo Electric Power Co. paid a uniform ¥100,000 special summer bonus to each of its some 5,000 employees in managerial positions.
Tepco President Naomi Hirose told reporters that the company wanted to express its appreciation for their hard work although he conceded some may doubt if this small sum would serve that purpose.
Needless to say, boosting the morale of employees in managerial posts was not the only reason for paying the bonus. Another obvious reason was to put the brakes on a recent sharp rise in the number of employees who are resigning.
Having faced a managerial crisis due to the severe accident at its Fukushima No. 1 nuclear power plant in March 2011, Tepco carried out salary cuts of 20 percent for ordinary employees and 25 percent for those in managerial posts in fiscal 2011 (April 2011 through March 2012). As the company’s balance sheet deteriorated further as the costs of importing fuels soared due to the declining value of the yen currency, the pay cut rate for managers rose to 31 percent in fiscal 2012.
These measures did serve to reduce total personnel costs by ¥177.9 billion annually. But the downside of the measures is the emergence of cases in which lower-ranking employees who are paid for overtime work earn more than some of employees in managerial posts. This has lowered the morale of employees in the managerial class, accelerating a move among them to leave Tepco and look for other jobs.
In fiscal 2011, 465 managerial and nonmanagerial employees voluntarily quit Tepco. The number shot up by more than 50 percent to 712 in fiscal 2012, which was 5.3 times the corresponding figure in the pre-disaster fiscal 2010. This is quite serious for Tepco, as one company insider pointed out that of those who voluntarily quit, 40 percent were “core employees” who were either already holding managerial posts or about to be promoted to such posts.
This trend shows no sign of ending. From April to the end of June 2013, 109 employees voluntarily quit. A high-ranking official of the Tepco group said the drain of human resources is accelerating among employees close to the hub of Tepco management.
An official of the trade and industry ministry said that Tepco may well already be in a state of “imminent brain death.”
The company’s financial straits stem from mounting expenditures to deal with the Fukushima nuclear crisis: (1) compensation paid to victims of the nuclear accident, (2) decontamination of soil and buildings contaminated by radioactive substances and (3) dismantling of the damaged reactors.
Compensation to victims will be paid out of up to ¥5 trillion to be provided by the government-funded Nuclear Damage Liability Facilitation Fund (NDLFF) in aid. Tepco will have to pay the money back from future profits. The sum committed by the NDLFF had already reached ¥3.909 trillion as of June 25. The scope of the compensation will further grow as compensation covers citizens originally excluded from coverage, such as those who voluntarily evacuated. Soon the total amount of compensation will reach the ¥5 trillion ceiling in aid from the NDLFF.
Decontamination of polluted areas and decommissioning of the reactors are also serious problems for the company because it has to bear all the costs by itself. The cost needed to reduce the annual radiation dose to the targeted 1 millisievert is estimated to be at least ¥5 trillion. A Tepco official says the sum could reach ¥10 trillion.
For decommissioning the damaged reactors, Tepco has set aside nearly ¥1 trillion. But ¥300 billion has already been spent to cope with 400 tons of underground water flowing into the reactor buildings every day, even before any concrete action for decommissioning has been taken.
The entire process of decommissioning is expected to take 30 to 40 years. No decision has been made on where to bury high-level radioactive wastes. A reactor manufacturing industry insider has said ¥5 trillion will be required to dispose of such wastes and turn the nuclear power station site into raw land.
Another headache for Tepco is the delay in restarting the operation of its Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture. The company hopes to restart it in order to avoid high costs of purchasing imported fuels to run thermal power plants.
In an effort to get consent for its plan to restart the Nos. 6 and 7 reactors at the plant from the Niigata prefectural government, Tepco President Hirose visited Niigata on July 5 only to encounter staunch opposition from Gov. Hirohiko Izumida. The governor repeatedly asked, “Why do you hurry to restart the plant?”
It is estimated that if one reactor is stopped for a year, incremental fuel costs and other factors will reduce the company’s profit by ¥96 billion to ¥132 billion. This means a failure of Tepco’s “comprehensive special business plan” to achieve a current account surplus in fiscal 2013.
For fiscal 2012, Tepco reported a consolidated current account deficit of ¥326.9 billion despite raising electricity rates for business enterprises as well as private consumers and reducing labor, materials and other costs by ¥496.9 billion — 40 percent more than the original cost reduction goal of ¥351.8 billion.
A current account deficit for fiscal 2013 would mean losses for three straight years. This would make it extremely difficult for Tepco to secure new bank loans.
As of the end of March, Tepco’s long-term debts of more than ¥3.5 trillion were owed to 77 financial institutions. Over ¥1 trillion becomes due during fiscal 2013, including redemption of corporate bonds worth more than ¥580 billion.
Tepco hopes to straighten out the situation by raising electricity fees and by obtaining additional funds from the NDLFF with the support of the Liberal Democratic Party on the strength of its overwhelming victory in the Upper House election in July.
But a banking source says that in order to turn the company’s balance sheet into the black, Tepco will have to raise electricity fees by nearly 20 percent. The fees have already been raised since March and the average household fees in August are ¥705 higher than in February. Meanwhile, the consumption tax rate is scheduled to go up April 2014. Enterprises and consumers will not accept such an additional fee increase of nearly 20 percent.
It will not be easy either to win general public support for funneling more taxpayer money through the NDLFF if creditors — such as shareholders, bondholders and banks — continue to remain protected.
According to a government insider, there is mounting opinion within the trade and industry ministry that Tepco should be placed under legal liquidation. Specifically, most of its operations for compensation payments and part of its operations for decontamination and reactor decommissioning would be placed under government control and the rest would undergo legal liquidation. Its electricity generating and supplying operations would be sold to other power companies.
An official of the ministry said if such a scheme is adopted, an increase in taxpayers’ burden may be accepted by the public. But at this point, how to divide Tepco’s assets and liabilities is unclear.
A major bank official said if banks were asked to forgive a large portion of Tepco’s debts in order to reduce burdens on taxpayers, the scheme would “disintegrate in midair.” This is because banks have long assured their shareholders that loans to Tepco will be safe and paid back.
The drain on human resources from Tepco in the form of employees in managerial positions running away from it all represents a “funeral march” for its organizational collapse.
This is an abridged translation of an article from the August issue of Sentaku, a monthly magazine covering Japanese political, social and economic scenes.