TEPCO gets Y1 tril in public funds, putting it under gov't control

TOKYO —

The operator of Japan’s crippled Fukushima nuclear power plant was effectively nationalised Tuesday as it received one trillion yen of taxpayer money to stay afloat.

The public bailout of Tokyo Electric Power Co (TEPCO) in the wake of last year’s tsunami-triggered accident gives the government 50.11% of the utility’s voting rights.

And the deal has an option which allows the Nuclear Damage Liability Facilitation Fund to raise the stake up to 75.84% to impose stronger control if TEPCO fails to push reforms.

The country’s biggest utility will remain under state control for a “considerably long period of time”, Yukio Edano, the minister of economy, trade and industry, told a news conference.

But he added it would be “appropriate” for TEPCO to repay the debt and restore itself “as a purely private company in course of time.”

A 9.0-magnitude earthquake and monster tsunami ravaged Japan’s northeast coast in March 2011, leaving some 19,000 people dead or missing and sparking reactor meltdowns at the Fukushima Daiichi plant.

TEPCO posted a massive 781 billion yen net loss in the fiscal year to March 2012 following the disaster, after which it had to increase imports of fossil fuels to make up for a nuclear power shortfall when Japan switched off its nuclear reactors. Only two reactors have since been restarted.

In addition to the strong operating headwinds, it is also facing massive clean-up and compensation bills from the tens of thousands of people whose homes were ruined or who lost livelihoods as a result of radioactive leaks.

“We are now placed under ‘temporary state control,’” TEPCO president Naomi Hirose said in a statement.

He said his company had been granted a “last chance” to transform itself into a “New TEPCO” and it would make “utmost efforts” to compensate those affected by the meltdown disaster, scrap the crippled reactors and supply electricity in a stable manner.

In mid-July, the government allowed TEPCO to raise household electricity rates in its service area, including Tokyo, by an average 8.46%, although the utility had initially wanted a 10.28% increase.

Hirose said earlier that TEPCO would make further cost-cutting efforts to realise its target of logging a net profit in the year to March 2014.

Apart from the injection of public money, TEPCO has already agreed to borrow about one trillion yen from its major lenders with 370 billion yen expected to be loaned on Wednesday, media reports said.

© 2012 AFP

  • 3

    A+b/a=a/b≡?

    “By taking shares (worth one trillion yen), the fund shall take more than half of the voting rights… in order to ensure achievement of three goals of ‘compensation, decommissioning, and stable (electricity) supply,’” it said.

    Hope it is a step in the right direction for Japan. I think it is. Time will tell.

  • 1

    zichi

    I'm not sure why TEPCO is allowed to stay in business except for dealing with the nuclear disaster. It should be sold off to a new power company.

    TEPCO have made two panels to investigate ways to bring the company back to profit, it believes it can do that.

    The government needs to review the liability that power companies pay in the event of a nuclear disaster. Currently limited to ¥120 billion.

    The clean up and decommissioning of the atomic plant will take more than 50 years and will cost more than ¥30 trillion. The cost of compensation claims will be ¥5 tillion. All of it paid by the taxpayer.

  • 2

    Thomas Anderson

    Meanwhile, TEPCO is the only company that is increasing the price of electricity. All the other companies have lowered their price.

  • 0

    zichi

    Thomas Anderson,

    KEPCO have increased their monthly power charges every month for the last three months. About ¥80 a jump.

  • 4

    Yubaru

    And now that the government has taken over TEPCO I do believe that it is time for everyone around Fukushima to give up hope of ever returning to their homes.

    Things just went from bad to worse imo. While TEPCO's management was bad, can anyone say with a straight face that the government is any better?

  • 3

    Disillusioned

    Ah, yes! But, nuclear power is so cheap, right?

  • 10

    Frungy

    Industry Minister Yukio Edano said TEPCO must rid itself of a secretive and complacent corporate culture, and regain public confidence.

    Pot. Kettle. Black.

  • 3

    ExportExpert

    Edano said TEPCO must rid itself of a secretive and complacent corporate culture, and regain public confidence. \ And now that the govt owns 50% how is this going to be possible Govt doesnt have a good record on being open and honest

  • 0

    gogogo

    Now reduce my rates by 10% please!

  • 3

    Cricky

    There shutting the doors on openess, empathy and actions, minimizing losses and maximizing profits just got ramped up a gear. The N-industry sob story just got an authoritative story teller.

  • 6

    smithinjapan

    The worst part about this, aside from using tax-payer's money to bail out a company that should have been sold off, is that now that the government has a 50% + ownership of the company do you think they're going to want to see it lose profits? No good will come of this, save that SOME of the victims of the disaster who have been waiting more than a year for compensation might see a little relief soon.

  • 5

    Ms. Alexander

    Geez, we're getting ripped off left and right! The government is giving TEPCO our money to bail them out AND approved TEPCO to raise the electric bill. WTH?!

  • -1

    LAcajun

    zichi,

    TEPCO was just sold off... to a reliable management company.. Japan Government Inc. or (better known as the people of Japan)... now who will complain about themselvs, gonna be fun to watch how this turns out in the future for the children of Japan..

  • -4

    zichi

    LAcajun,

    there's a big difference between selling off TEPCO and just pumping ¥trillions of taxpayer money into it?

  • 3

    CrazyJoe

    After TEPCO is nationalized, make sure they're under new management.

  • 0

    Waxman

    Excellent news!! Party time for TEPCO management monkeys!!! Dude I got ¥1trillion in my pocket, where do we go? Lets go Shibuya, perhaps Ginza!!!!

  • 0

    my2sense

    translation... 500 billion will actually be used legitimately and the other half... well you know pocket there a hostess club there.

  • 4

    bruinfan

    I hope they prosecute the former president (Shimizu) and upper executives of TEPCO. I hope...

  • 4

    gogogo

    I want to know where that money is going to be used please!

  • 1

    ItsMe

    zichi, I highly doubt there are any buyers for Tepco, thus the need for the govt to step in. can't really let them go bankrupt, or all businesses in kanto will have no power--- not exactly a good plan to keep the economy rolling... I'd have to say they do not have good short term options---- all we can do is hope some of the long-term plans go forward, like separating power distribution from power generation to increase competition, etc... Not sure what is happening on the "safety" side, but I would suggest one single thing would increase safety significantly: eliminate nuclear subsidies, and require companies to pay for the cost of the 10,000 year disposal of spent fuel.

  • -3

    zichi

    ItsMe There would be many buyers if TEPCO was broken up. The fossil power plants could be sold to a new power company or an existing one. The Tokyo customer base could be sold off to a new power supply company. TEPCO has many hidden assets overseas which could also be sold off. The question would be what to do with the nuclear plant in Niigata. I don't think the second Fukushima plant or Daini will ever be allowed to operate again.

    If TEPCO was left with just dealing with the nuclear disaster, the number of employee's could be greatly reduced. Workers could move to the new companies.

  • 5

    Rick Kisa

    Industry Minister Yukio Edano said TEPCO must rid itself of a secretive and complacent corporate culture, and regain public confidence. He has urged the firm to build a fresh culture, listen to voices of those who have been harmed (by the nuclear crisis), to customers and to society.

    it is not only TEPCO that must change; even government. The culture of complacency is fuly entrenched in government. A recent report showed that the fukushima scandal was man made and involved collusion of the government and TEPCO. If the government was to listen to the voices of the people, the nuclear reactors would not have been restarted in the first place! There is need to rethink the energy atrategy and goverment should take the lead.

  • 0

    ItsMe

    zichi, fair enough, there may be assets that they could sell off--- They most likely could not sell whole as-is to a private company, but I agree that parts could be made to be worth something... that said, with issues of regulation up in the air, I think even selling off certain assets could be difficult--- or it could make it more difficult to pass necessary regulation because of the "deals" that might be made necessary in order to complete a sale.

  • 1

    cornbread1

    Here we go again, socializing losses (and privatizing profits)--even as Japan's debts keep ballooning. When will people learn??

  • 0

    wanderlust

    Under government control, but will the government control it? Or will they allow the existing management to carry on in the same way that they've done for the last 20~30 years?

  • 0

    Newsman

    You know TEPCO was doing poorly when Fukushima Daiichi is put under the control of the national government and everyone says it must be an improvement.

  • 0

    ThonTaddeo

    So let's see: we taxpayers have to pay the trillion yen for the government to take control of TEPCO, we taxpayers have to pay more for electricity despite TEPCO's rates already being some of the highest in the world, we taxpayers are sweaty and miserable in the 28-degree indoor temperatures that will go on for who knows how many more summers, and we taxpayers will be footing the bill for the multi-decade cleanup costs and compensation claims.

    The least that could be done would be to hand off those plants to experts from places like France and Switzerland, which have exemplary records in handling nuclear power. Instead, we're getting government-appointed cronies in place of TEPCO cronies.

    Looks like it's Taro and Hanako Q. Taxpayer paying all the costs and getting nothing -- not even peace of mind -- in return.

  • 0

    danalawton1@yahoo.com

    All this and TEPCO (9501) stock still trades. People... you should probably go out and buy TEPCO shares at Y131 a share. The Japanese Govt now owns more than 1/2 the company.... the Govt has thrown massive amounts of money into the company.... and yet the company is still surviving and trading. It reminds me of a hospital patient with cancer that has beat all the odds.

  • 0

    xrc

    Yes, raise the electric bill an average of 8.47%. Yes, Well, what about saving money! I went to the shopping mecca of Machida (still considered Tokyo) and ya know what. as I walked down the streets, most shops had their doors open...yes, with AirCons running full blast. Now it doesn't take a rocket scientist to figure out how much electricity is being wasted. Even where I live in Sagamihara the shop two doors down DOES NOT have a door....in the summer it's Airconed...in the winter it's heated. I asked them (a small shop) how much they pay a month for electricity and they said about ¥150,000 (a month). Why do they do that? Because it will attract people walking by when they feel the fresh cool air blowing out onto the street. Are they too lazy to open a door? They do have automatic opening doors, don't they? I doubt the shop sells that many drinks to pay for it! The Japanese are afraid to go against their old habits....then they demonstrate against nuclear power....

  • 0

    gelendestrasse

    I don't know if the bureaucrats are any better at running a utility than the TEPCO bosses proved to be but we shall see. One way or the other the cost of electricity is going to go up.

    Yeah, there is a lot of wasting power by retail shops all through the metro area. In the past it was merely wasteful but with the current power cuts it's bordering on criminal, IMHO. The government ought to mandate closed doors, temp of at least 25C, etc. until the power shortage is solved.

  • 0

    Schopenhauer

    Monopoly brings corruptions. In that context, it is a very good thing if the TEPCO "family" would be broken up in this occasion. Despite the public nature of the company, the company was under strong influences of cronism. I tell my experience. TEPCO was a very popular company for Japanese students - salary nice, no risk of bankruptcy, attractive retirement pay and pensions, etc. But for ordinary students who have no connections to the company, it was very difficult to join the company. Hired were in many cases those whose fathers worked for TEPCO, they were sons or daughters of business partners, they were with recommendations of LDP politicians, etc.

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