Factbox: Plan for Tepco nuclear compensation

TOKYO Thu May 12, 2011 11:35pm EDT

TOKYO (Reuters) - The Japanese government approved a plan on Friday to help Tokyo Electric Power Co pay compensation to those affected by radiation leaks from its Fukushima nuclear, which was damaged by the March 11 earthquake and tsunami.

The scheme is designed to prevent the troubled utility from immediately going into default or bankruptcy while meeting a flood of compensation claims.

The government hopes to minimize any adverse impact on the stock and bond markets by protecting shareholders and bond owners of Tokyo Electric, known as Tepco, while at the same time ensuring stable power supply.

FUND

A pillar of the scheme is a fund that will help finance Tepco's compensation payments. The government will provide financing to the fund, including issuing special bonds, which the fund can convert to cash in the future. Kansai Electric and other utilities that operate nuclear power plants will contribute to the fund.

The fund will provide as much financial assistance as needed to Tepco, including a capital boost, for compensation payments and capital spending to prevent the utility from falling into negative net worth.

TOKYO ELECTRIC'S BURDEN

The government set no initial limit on Tepco's liabilities. The company will reimburse the fund over a period of several years from its profits while maintaining stable power supply.

The government has asked Tepco to try to avoid passing on compensation costs to power users and to make utmost efforts to raise funds on its own by asset sales and cost-cutting.

GOVERNMENT OVERSIGHT

Tepco will be placed under close government oversight and will need to seek government approval for restructuring and other management matters.

BURDEN ON OTHER STAKEHOLDERS

Shareholders and bond owners are protected in the scheme. But Tepco is likely to suspend dividend payments for several years to help cover compensation costs.

The government plan also calls for cooperation from all stakeholders, including financial institutions.

In the wake of the nuclear crisis, Tepco's main creditor bank Sumitomo Mitsui Banking Corp and other lenders provided 1.9 trillion yen ($23.5 billion) in emergency loans. The lenders have said there is little more they can do to help the utility, rejecting the possibility of interest reductions or debt waivers.

But Chief Cabinet Secretary Yukio Edano has said he thinks Tepco can get some kind of help from lenders for loans made before the earthquake because such risks should have been factored in when extending credit.

(Reporting by Taiga Uranaka, additional reporting by Kiyoshi Takenaka and Yoshifumi Takemoto)

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