TOKYO (Reuters) - Japan’s cabinet approved a draft law to help Tokyo Electric Power pay billions of dollars in compensation to its radiation refugees, kicking off lawmaker wrangling that may take weeks to decide the fate of Asia’s largest utility.
The approval is a step forward in a slow process that has frustrated the victims of radiation leaks at Tokyo Electric’s nuclear plant in Fukushima, and drove up shares in the company by 25 percent on Tuesday.
However, opponents of the bill from both sides of a divided parliament may now trip up the proposed law or demand amendments in return for support, leaving Tokyo Electric’s fate uncertain.
Holders and analysts of the company’s $110 billion in debt remain wary.
“It has not been made into a law yet. So, it’s too early to take a sigh of relief,” said Akihito Murata, credit analyst at Deutsche Securities.
Tokyo Electric’s five-year CDS spreads were bid at 1,000 basis points Tuesday, unchanged from Monday, meaning it costs $1 million to insure $10 million of Tokyo Electric’s debt.
Tokyo Electric’s shares, which have fallen 88 percent since the March 11 quake, have been volatile as investors jumped in and out of the stock. On June 7, the shares dropped 28 percent before rebounding.
Tokyo Electric, also known as Tepco, said: “We hope that the proposed bill will be enacted in parliament as soon as possible.”
The company said it was ready to make fair and speedy compensation payouts once lawmakers gave the green light.
However, Prime Minister Naoto Kan’s track record in winning lawmaker approval for his post-quake policies suggest a bitter parliamentary battle will ensue.
Facing mounting pressure to step down, he has already failed to get several other disaster-related bills passed.
The latest move comes three months after a massive earthquake and tsunami triggered radiation leaks at the plant, triggering the worst nuclear crisis since Chernobyl, and a month since the government first presented its bailout plan.
Trade Minister Banri Kaieda, whose ministry regulates Tepco and other power utilities, told a briefing the government aimed to submit the compensation bill to parliament as soon as possible.
Asked about a newspaper report that Tepco could raise its electricity tariffs to funds part of the compensation, Kaieda said: “We have to watch so that (Tepco) will not shift it (compensation fee) on to utility fees so easily.”
The Mainichi newspaper reported on Tuesday that Tepco will face a total of 10 trillion yen ($124 billion) in compensation claims and will have to raise its electricity charges by 16 percent from next year to cover the costs. The paper cited documents it had obtained.
Under the plan, a fund will be set up to help Tepco compensate people and businesses affected by radiation leaks from the plant so that the regional power monopoly in Tokyo and surrounding areas can keep supplying electricity.
Thousands of residents and businesses have been forced to evacuate the area around the plant.
The country’s other nuclear power operators will be required to make annual contributions to the fund based on how many reactors they own and the government will also inject money in it if necessary.
Tepco in return will issue preferred or common shares and will pay back the fund over an unspecified number of years.
The government plans to issue special-purpose bonds to help finance the fund and has said that in return for public backing, it would exert control over management of Tepco and other power utilities “for a certain period of time.”
Failure to win approval would force the government to look for a plan B to ensure Tokyo Electric remains in operation so that power to businesses and households stays turned on in a region that accounts for more than 40 percent of Japan’s economy.
Atsushi Saito, president of the Tokyo Stock Exchange where Tokyo Electric trades, has proposed that the utility go through a court-led restructuring and be nationalized and delisted.
The government, said Shinsuke Kitagawa, an official at the Ministry of Economy Trade and Industry, doesn’t want to wipe out shareholders.
“The bill does not demand any further burden on” shareholders, he said at a briefing on Tuesday.
Additional reporting by Chisa Fujioka and Junko Fujita, Writing by Tim Kelly and Tomasz Janowski; Editing by Vinu Pilakkott