Tokyo threatens to withhold Tepco aid

TOKYO - - High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/73a67eec-5628-11e1-8dfa-00144feabdc0.html#ixzz1mQ5gtlzt JapanÂ’s government has threatened to withhold a Y1tn $12.9bn financial rescue of Tokyo Electric Power, owner of Fukushima Daiichi nuclear power station, unless the struggling utility allows itself to be nationalised.

In the clearest indication of the governmentÂ’s intentions to date, Yukio Edano, the minister responsible for energy policy, told TepcoÂ’s president that the company would have to cede ownership to the state in return for enough new capital to ward off insolvency.

The ultimatum came as Tepco widened its forecast net loss for the fiscal year ending in March, from Y600bn to Y690bn. The company faces mammoth clean-up and compensation costs and lost Y1.25tn last year.

Although Tepco and the government agreed on the outlines of a rescue last month, they have remained at odds over the extent of the shareholder voting rights to be attached to the governmentÂ’s capital injection, according to people close to the situation.

It would be the first time the state has injected equity into Tepco since the nuclear accident at Fukushima following the earthquake and tsunami in Japan last March.

TepcoÂ’s market value has shrunk by about 90 per cent since then, and the proposed investment would give the government a roughly two-thirds stake in the company. But Tepco executives are said to want to limit the stateÂ’s control to less than 50 per cent by issuing it a mix of regular and non-voting preference shares.

Although Tepco needs the money to avoid insolvency, its huge size gives it leverage in negotiations, as the collapse of the electricity provider, which has a near-monopoly in the Tokyo area, could have potentially disastrous consequences.

Taxpayers have already helped Tepco cover the cost of compensating Fukushima residents and cleaning up the area, an amount estimated to be Y4.7tn but which is likely to rise. Tepco is meant to repay those costs over time – another reason the government is unwilling to let it fail.

Tepco is planning to include a formal request for capital in a business plan that it must submit to the government by the end of its fiscal year next month. In a public meeting on Monday with Toshio Nishizawa, Tepco president, Mr Edano said, “I have absolutely no intention of approving a business plan that contains a request for capital without offering commensurate voting rights.”

The governmentÂ’s cash injection is to be matched by a roughly equal amount of loans from TepcoÂ’s private and public sector banks, according to people involved. They are offering to provide the additional financing, at relatively low rates, in exchange for not having to write off any of TepcoÂ’s outstanding Y7.8tn debt.

Mr Edano told the Financial Times last month that the government aimed to carry out broad reform of JapanÂ’s electricity sector, which is dominated by regional monopolies. That goal would be easier to achieve if the state owned the countryÂ’s largest power provider.

“Without a structure that includes a certain amount of competition, there can be no revival,” said Mr Edano, adding that nationalising all nuclear plants might also be an option.

Related News

ontario nuclear

Ontario confronts reality of being short of electricity in the coming years

TORONTO - In a fit of ideological pique, Doug Ford’s government spent more than $200 million to scrap more than 700 green energy projects soon after winning the 2018 election, portraying them as “unnecessary and expensive energy schemes.”

A year later, then Associate Energy Minister Bill Walker defended the decision, declaring, “Ontario has an adequate supply of power right now.”

Well, life moves fast. At the time, scrapping the renewable energy projects was criticized as short-sighted and wasteful. It seems especially so now as Ontario confronts the reality of being short of electricity in the coming years.

How short? A recent report by…

READ MORE

Why the Texas Power Grid Is Facing Another Crisis

READ MORE

fukushima nuclear plant

Spent fuel removal at Fukushima nuclear plant delayed up to 5 years

READ MORE

riverbend nuclear power plant

NRC Begins Special Inspection at River Bend Nuclear Power Plant

READ MORE

Idaho Power Settlement

Idaho Power Settlement Could Close Coal Plant, Raise Rates

READ MORE