Bloomberg News

Tepco Cuts Loan Costs By a Third After Fukushima Accident

June 30, 2011

(Updates with company comment in fifth paragraph.)

June 30 (Bloomberg) -- Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis in 25 years, reduced the average interest rate it pays on 3.4 trillion yen ($42 billion) of long-term loans to less than 1 percent.

The Japanese company known as Tepco reduced the average rate to 0.992 percent in the year ended March 31 from 1.551 percent a year earlier, according to a securities filing. The Tokyo-based company more than doubled long-term loans, which it defined as debt maturing in more than one year, from 1.6 trillion yen a year earlier.

Tepco received almost 2 trillion yen of emergency loans from banks including Sumitomo Mitsui Banking Corp. after the March 11 earthquake and tsunami knocked out cooling systems at its Fukushima Dai-Ichi nuclear plant. The loans left Tepco with 2.24 trillion yen of cash on hand, the most of any non-financial Japanese company, at the end of March, according to data compiled by Bloomberg.

“The banks must have given the company special rates, which helps lower the financial burden,” said Tomohiro Jikihara, a Tokyo-based analyst at JPMorgan Chase & Co. The development isn’t enough to entice investors to buy, because “the news flow is predominantly negative and the total amount of reparations is still unknown,” he said.

Loan Repayments

The decline in average interest rate is due to the company having paid off some of its more expensive loans, said Satoshi Watanabe, a spokesman at Tepco. Watanabe declined to give further details.

Tepco shares rose as much as 2.2 percent today in Tokyo to 332 yen before closing at 326 yen at 3 p.m. local time. The shares have dropped 85 percent since the day before the quake.

About 60 percent of the company’s loans mature in more than five years, according to the filing. The company is paying an average coupon of 1.98 percent on all its bonds, according to data compiled by Bloomberg. The average maturity on its 4.7 trillion yen of bonds outstanding is five years.

The company owes Sumitomo Mitsui 769.5 billion yen, Mizuho Corporate Bank Ltd. 581.8 billion yen and Bank of Tokyo- Mitsubishi UFJ Ltd. 349 billion yen, according to the securities filing.

Tokyo Electric is under pressure to sell assets to raise at least 600 billion yen to compensate victims of the nuclear meltdown and scrap the reactors. The utility may receive government help after Prime Minister Naoto Kan’s cabinet agreed on a bill providing a safety net for the company as it pays for the accident-related damages.

Government Help

The third-party entity will issue bonds in a bid to fund compensation and be allowed to acquire assets owned by the utility, while the government will guarantee loans by banks to the third-party organization, according to the bill.

“The next big news for Tepco is whether the government compensation scheme passes the Diet,” said Jikihara, who doesn’t have a rating on the company. “I expect Tepco’s reparation payments to reach 3 trillion yen, not including payments for potential damage to fisheries and prefectures other than Fukushima.”

--With assistance from Yusuke Miyazawa in Tokyo. Editors: Andrew Hobbs, Indranil Ghosh

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To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net


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