Bloomberg News

Tepco Losses Rise to 1.8 Trillion Yen After Fukushima Disaster

November 04, 2011

Nov. 4 (Bloomberg) -- Tokyo Electric Power Co. forecast another full-year loss, bringing the deficit from the Fukushima nuclear catastrophe to 1.8 trillion yen ($23 billion) as it won approval for a business plan that will release government aid to compensate for the crisis.

Japan’s biggest utility expects a loss of 600 billion yen for the year ending March, according to a statement from the company known as Tepco today. Tepco’s business recovery plan includes cutting 7,400 jobs and slashing costs by 2.5 trillion yen during the next 10 years, the statement said.

Approval of the plan today by Trade Minister Yukio Edano during a meeting with Tokyo Electric President Toshio Nishizawa and staff from the compensation fund will release about 900 billion yen of government aid. It will be used to pay compensation to residents, farmers, and fisheries and forestry businesses.

The plan’s approval was expected and it keeps Tepco alive for the year ending March, said Takashi Aoki, who helps manage 120 billion yen of investments at Tokyo-based Mizuho Asset Management Co. Still, “Tepco may wipe out its net assets of 708.8 billion yen by the end of next fiscal year” without an increase in electricity prices and the restart of nuclear power plants, he said.

Shares Fall

Aoki said his funds don’t own Tepco shares, which fell 0.7 percent to 300 yen at the close in Tokyo today. They are down 86 percent since the March 11 earthquake and tsunami that wrecked the Fukushima Dai-Ichi nuclear plant north of Tokyo. The company reported first-half earnings at about 4 o’clock after the market closed.

Tepco had a 627.3 billion yen loss in the six months to Sept. 31 against a profit of 92 billion yen a year earlier. Its forecasting an operating loss of 305 billion yen for the full- year, according to its earnings statement.

Its loss was 1.25 trillion yen in the year to March 31 and 572 billion yen in this year’s first quarter.

The utility supplies power to 29 million customers in the political and economic heart of Japan. The reactor meltdowns in Fukushima forced 160,000 people to flee radiation and damaged fishing, farming and forestry businesses.

“Tepco must compensate those affected with sincerity and generosity as well as carry out a thorough reorganization,” Edano said today in Tokyo.

The company must draw up a “comprehensive” business plan by next Spring that fulfills the threestrq three goals of full compensation, keeping the power on and resolving the Fukushima crisis, Edano said. The issue of whether the board must resign to take responsibility will also be considered in the plan.

Supplementary Budget

The first payout involves Japanese government bonds being issued to the Nuclear Damages Facilitation Fund set up in September. These can be immediately redeemed and the funds raised transferred to Tepco, which will book as a special gain in its accounts.

Legislation passed in September provides capital of 2 trillion yen for the fund, which may request a further 3 trillion yen to be included in a supplementary budget.

Tepco is expected to have to pay 1.02 trillion yen in the year to March 31 in compensation to those affected by the disaster, according to an October report from a government investigation of the utility’s finances. Compensation may total 4.5 trillion yen in the first two years of the disaster, the government panel said.

Decommissioning the four damaged reactors at the plant, located about 220 kilometers (137 miles) north of Tokyo, will cost at least 1.15 trillion yen, according to the government panel, which was headed by bankruptcy lawyer Kazuhiko Shimokobe, who attended today’s meeting with Edano.

Shimokobe is now head of the steering committee of the fund that will provide financial support to Tepco.

The bill to clean up the contamination is estimated to be $14 billion over 30 years, according to the environment ministry.

--Editors: Aaron Sheldrick, Peter Langan

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

To contact the editor responsible for this story: Peter Langan at plangan@bloomberg.net


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