Japan government mulls Tokyo Electric nationalization: media

TOKYO Tue Mar 29, 2011 12:02am EDT

TOKYO (Reuters) - The Japanese government could discuss a possible nationalization of Tokyo Electric Power among other options to deal with the operator of the plant at the center of the country's nuclear disaster, a senior cabinet minister said on Tuesday.

The future of Asia's largest utility has been questioned since the March 11 earthquake and tsunami struck its Fukushima Daiichi nuclear complex, causing it to leak radiation. Its shares have fallen 70 percent and the cost of insuring its debt against default has risen 10-fold.

National Strategy Minister Koichiro Gemba said a discussion about bailing out Tokyo Electric was possible in response to a Yomiuri newspaper report that a plan to temporarily nationalize the company has been floated by some members of the Japanese government.

"Naturally it is possible that there will be various debates about the state of Tokyo Electric," Gemba was quoted by Kyodo news agency as saying when asked about the possibility of nationalization.

The Yomiuri had reported that some members of the government had proposed a plan for the state to take a majority stake in Tokyo Electric, also known as TEPCO, and help it pay for damages stemming from the nuclear accident.

The crisis appeared to escalate in the past few days with plutonium found in soil on Tuesday, rattling already shaky financial markets.

HEAVY DEBT LOAD

Chief Cabinet Secretary Yukio Edano had said earlier on Tuesday that the government was not currently considering nationalizing the utility.

"At this point, it is my understanding that government institutions are not considering such a move. The government will be directing TEPCO to do this everything possible, to resolve this situation and those who are affected," he said.

Tokyo Electric spokesman Hajime Motojuku said he was unaware of any plan for nationalization: "Our first and biggest priority at this moment is to prevent the nuclear power plant accident from worsening further," he said.

Tokyo Electric shares were untraded due to a glut of sell orders at 566 yen, down 19 percent from Monday's close. The company has lost about $30 billion in market value since the March 11 disaster.

The spread on Tokyo Electric's 5-year credit default swaps widened to a record high of 475 basis points on Monday on Markit, against just 40 points before the crisis.

Hajime Nakajima, a trader at Cosmo Securities, said that investors were spooked by the nationalization talk.

"Although details cannot be seen such as how exactly the government is going to nationalize the company, as long as there are concerns that Tepco may be nationalized, investors don't want to hold the stock. Passive funds are selling too."

In a step to shore up its finances, Tokyo Electric Power has started talks with Japan's largest banks for emergency loans of up to $25 billion, sources told Reuters last week.

The utility, which provides power to about one-third of the Japanese population, had 432 billion yen in cash and equivalents at the end of December and 7.5 trillion yen in outstanding debt, according to its financial statements.

Of its roughly $64 billion in outstanding bonds, the company is due to repay $4.8 billion this year, and another $5.6 billion in 2012, underscoring the importance of refinancing to meet its funding needs. ($1 = 81.705 Japanese Yen)

(Additional reporting by Ayai Tomisawa and Natsuko Waki; Editing by Edwina Gibbs, Nathan Layne and Lincoln Feast)