UPDATE 1-US proxy firm against TCI dividend plan for J-Power

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By Junko Fujita and David Dolan

TOKYO, June 13 (Reuters) - Japanese electricity wholesaler J-Power (9513.T) got a boost in its battle with fund TCI on Friday, after proxy advisory firm Glass, Lewis & Co said shareholders should oppose the fund's push for a higher dividend.

The news sent shares in J-Power lower, and the stock finished down nearly 3 percent in Tokyo.

The management of Electric Power Development Co, commonly known as J-Power, is preparing to meet with shareholders later this month at an annual stakeholders meeting, for which the UK-based TCI has launched a proxy fight.

The Children's Investment Fund (TCI), J-Power's largest shareholder, has proposed an increase in dividend payments and limits on cross shareholdings, and opposes the re-election of President Yoshihiko Nakagaki to the company's board.

U.S.-based Glass Lewis said shareholders should vote against the proposal for higher dividends.

Dividend policy should be set by a company's board and management, Jun Frank, the San Francisco-based director of Asia proxy research for Glass Lewis, told Reuters in a telephone interview.

"Unless we see a clear showing of mismanagement or disregard of shareholder value we generally don't go against the board (on dividends)," Frank said.

J-Power had negative cash flow of 16.3 billion yen in the year to March 31 because of its capital investments, according to a company statement issued on May 7.

"Increasing dividend payments to the level TCI wants could hurt the company's earnings as we are expecting negative cash flow in the future because of our capital investments," Masayoshi Kitamura, executive vice president for J-Power, said in an interview on Tuesday.

TCI wants J-Power to lift dividends to 80 yen or 120 yen. J-Power has said it plans to pay a dividend of 70 yen for the year ended March 31.

Separately, Japan Proxy Governance Inc, a Tokyo-based proxy advisory firm, said last week it would recommend its clients vote against the re-election of J-Power's president.

The firm, which is allied with Proxy Governance Inc of the U.S., is concerned about J-Power's corporate governance, as it is hard to improve governance without outside directors, an official at the firm said.

Earlier this year, the government prevented TCI from doubling its stake in J-Power to 20 percent, the first time Japan has blocked a foreign investor on national security grounds.

J-Power's stock fell 2.9 percent to 4,070 yen on Friday, compared with a 0.6 percent rise for the broader market. (Additional reporting by Edwina Gibbs, editing by Chris Gallagher)