(Adds Edano comment in fourth paragraph.)
Oct. 28 (Bloomberg) -- Tokyo Electric Power Co. submitted an initial request for state aid to avert bankruptcy and compensate residents and businesses afflicted by the radiation spewing from its wrecked Fukushima nuclear plant.
The company usually referred to as Tepco lodged a business plan with the government today that outlines cost cuts and other steps it will take to support the funding request, the Trade and Industry Ministry said in an email. Tepco spokesman Yoshikazu Nagai declined to say how much Tokyo Electric is seeking from the government’s compensation fund.
Tepco will ask the government for 900 billion yen ($12 billion), the Nikkei newspaper reported today. Tepco and the government’s fund drafted the business plan to pave the way for support for the utility, which may have to pay 4.5 trillion yen in compensation by March 2013 to residents and businesses hurt by the disaster.
“I’ll work out whether the management plan will be sufficient to move Tepco’s restructuring forward and adequately compensate those affected by the accident,” Trade and Industry Minister Yukio Edano, who will approve the plan before the utility receives the funds, told reporters today in Tokyo.
Executives of the company at the center of the worst nuclear crisis since Chernobyl will commit to cutting costs by 240 billion yen and raising as much as 400 billion yen from asset sales by the end of March, the Nikkei said.
Tepco will report an unconsolidated loss of 580 billion yen for the year to March 31, the newspaper said. Japan’s biggest utility has wracked up losses of 1.8 trillion yen since the disaster at Fukushima Dai-Ichi plant. The company’s shares, down 86 percent since the crisis began, closed 2.6 percent lower today.
Tepco will report earnings for the six months to Sept. 30 on Nov. 14, said an official involved in the company’s reorganization who requested anonymity.
The aid will be the first disbursement from the Nuclear Damage Liability Facilitation Fund that was set up last month with 2 trillion yen of funding.
Immediate payments to those affected by the disaster will amount to 1 trillion yen, the Nikkei said, less than a quarter of the 4.5 trillion yen estimated by a government panel for the first two years of the crisis.
Tepco paid out 133.6 billion yen in provisional compensation by Oct. 24, Nagai said today. He declined to comment on the Nikkei report or when the company will release its earnings statement.
The company started accepting applications for compensation last month and has paid a further 18.2 billion yen to claimants.
The utility’s plan outlines cuts to pension payments to former employees and the company will ask for a 300 billion yen loan from the state-owned Development Bank of Japan, according to the Nikkei.
A comprehensive business plan will be drawn up by next spring that may involve executives stepping down, the official involved in the discussions said. It may also consider whether Tepco’s power generation and distribution operations should be separated, he said.
Tokyo Electric’s Fukushima Dai-Ichi atomic plant has been discharging radiation since the March 11 earthquake and tsunami knocked out cooling systems, causing three meltdowns and explosions. The catastrophe forced 160,000 people to flee radiation and damaged fishing, farming and forestry businesses.
As well as ensuring compensation is paid, the government is trying to avert the bankruptcy of a company that supplies power to 29 million customers in the political and economic heart of Japan.
Tepco may face 8.6 trillion yen in funding shortages during the next decade if none of its nuclear power plants come back online and electricity prices aren’t increased, a government panel said earlier this month after reviewing the company’s finances.
“Tepco’s desire to raise electricity rates will probably be approved because it will become clear the company can’t survive even with the restructuring,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co.
The panel recommended cost cuts of 2.5 trillion yen within 10 years after reviewing Tepco’s books for almost four months. Edano reiterated the demand earlier this week.
The utility can sell assets worth 707.4 billion yen within three years, the government panel said earlier this month.
--Editor: Aaron Sheldrick
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