TOKYO (Reuters) - Tokyo Electric Power Co (9501.T) has asked the government for an injection of 1 trillion yen ($12 billion) in what would be Japan’s biggest public bailout outside the banking sector, as it struggles with the aftermath of the Fukushima nuclear crisis.
The utility, widely known as Tepco, said on Thursday it had also sought 845.9 billion yen from a government-backed bailout body to help compensate victims of the tsunami-triggered accident - the world’s worst nuclear disaster in 25 years.
Without the bailout, which must be approved by Trade Minister Yukio Edano, Tepco - which supplies electricity to 45 million people in and around Tokyo - could face insolvency, which in turn would mean massive losses for its lenders and bondholders.
Tepco President Toshio Nishizawa said the company’s capital has fallen to 620 billion yen, from around 2 trillion yen before the March 11 disasters last year, underscoring the urgency of the fund injection.
“If this situation continues, there is a real possibility that we will become insolvent,” he told a news conference. “I am painfully aware that our financial situation is extremely dire.”
The magnitude-9.0 earthquake and ensuing tsunami caused reactor meltdowns at Fukushima, triggering a radiation crisis and widespread contamination. Tens of thousands of residents within 20 km (12 miles) of the plant have been forced to evacuate, leaving behind their homes and livelihoods.
The disaster has left Tepco with huge compensation and clean-up costs, a mounting bill for fossil fuels to replace lost nuclear capacity, and the massive burden of decommissioning the devastated reactors, a process expected to take decades.
The bailout request paves the way for Tepco and the government to finalise a turnaround plan, which the company said on Thursday it wants to submit by mid-April. Tepco had been hoping to file the plan by the end of March, but has been delayed by the difficulty in finding a new chairman.
In return for the fund injection, 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.
The two sides have been squabbling over how much say the government will have in running the utility, an answer which could hold clues as to whether broader changes are in store for the 10 regional monopolies that produce and distribute electricity.
Tepco’s elusive new chief faces the mammoth task of restoring the company’s credibility and profits, especially amid doubts over the future of Japan’s atomic energy policy.
Only one of Japan’s 54 nuclear reactors is on stream, and it is not known whether or when any of them will restart given public concern over their safety.
Tepco is likely to include in its business scheme plans to restart reactors at its Kashiwazaki Kariwa plant in the year ending March 2014, and to raise electricity rates, according to sources.
Local governments are voicing concerns over reactor restarts, companies are furious about fee increases and Tepco needs government approval to raise household rates.
($1 = 82.8900 Japanese yen)
Writing by Chang-Ran Kim and Linda Sieg; Editing by Daniel Magnowski