UPDATE 1-Japan bailout official accepts Tepco chairman job

* Paves way for business turnaround plan submission

* Delay in filling post shows huge tasks to rebuild firm

* Shimokobe says wants to pick new president from Tepco (Adds comments from Shimokobe and analyst, backgrounds)

By Yoko Kubota

TOKYO, April 19 (Reuters) - The months-long hunt for the next chairman of Tokyo Electric Power Co ended on Thursday after Kazuhiko Shimokobe, a lawyer with expertise in turning around businesses and a member of the bailout body for the firm, accepted an offer to run the operator of the crippled Fukushima nuclear plant.

The decision paves the way for Tokyo Electric (Tepco) and the government-backed bailout body to submit this month a delayed business turnaround plan, which will outline how the utility aims to revive its business in return for one of Japan's biggest public bailouts outside the banking sector.

"I took a deep breath, and I told the prime minister that I have taken his offer seriously and will do my best, and that I will accept his request to become the chairman," Shimokobe told reporters after the offer from Prime Minister Yoshihiko Noda and Trade Minister Yukio Edano.

Last year's tsunami-triggered Fukushima nuclear disaster has left Tepco with huge compensation and clean-up costs, a mounting bill for fossil fuels to replace lost nuclear capacity, and a massive burden of decommissioning the devastated reactors.

Several names of business executives were floated to take over the chairmanship to reform the once-powerful utility, but the government had difficulty finding someone from the outside willing to take on the huge task of restoring the firm's profitability.

Some in the business community did not want to take the job unless they could see a clearer direction on factors essential for making Tepco profitable, such as the future of Japan's energy policy, reactor restarts and electricity rate hikes, a source close to the bailout body said.

TURNAROUND PLAN

The government's struggle in finding a successor to the current chairman Tsunehisa Katsumata has delayed the finalisation of the turnaround plan, which Tepco and the bailout body had hoped to submit in March to Trade Minister Yukio Edano.

Edano must approve the plan by mid-May in order for the supplier of electricity to 45 million people in and around Tokyo to stay afloat.

Shimokobe said he wants to choose a new president from within the company.

The 64-year-old lawyer has been a central figure in the bailout body, set up to cope with vast costs of post-disaster compensation, and has already been working for months to reform the once-powerful utility by pushing for restructuring.

"The fact that he is coming from the compensation commission likely tips the power towards the government and should help things move forward smoothly in terms of further capital injection and ultimately a soft nationalisation of the company," said Penn Bowers, a research analyst covering utilities at CLSA Asia-Pacific Markets in Tokyo.

Tepco, whose capital has fallen to 620 billion yen ($7.6 billion) from around 2 trillion yen ($24.6 billion) before the Fukushima disaster, asked the government last month for an injection of 1 trillion yen.

In return for the money, the government is keen to obtain majority ownership of Tepco, with the option to boost the stake to two-thirds if the firm drags its feet on corporate reforms, a source with knowledge of the matter has said.

A decision-making committee in the bailout body is set to meet as early as next week to finalise the business turnaround plan and submit the plan to Edano this month, a source close to the body has said. ($1 = 81.3100 Japanese yen) (Additional reporting by Nobuhiro Kubo, Kentaro Hamada and Aaron Sheldrick; editing by James Jukwey)