Bloomberg News

Tepco May Ask Government to Buy Stake, President Tells Newspaper

December 09, 2011

Dec. 9 (Bloomberg) -- Tokyo Electric Power Co. may ask the government to buy a stake in the company to avoid a collapse under the weight of compensation claims for the Fukushima disaster, President Toshio Nishizawa said in an interview in the Tokyo Shimbun newspaper today.

“It’s one possibility,” Nishizawa told the newspaper in response to a question on whether the utility needs a capital injection. The interview follows a flurry of news reports yesterday suggesting a state-run fund will buy preferred shares in the company.

“It’s the beginning of the endgame for Tepco as the entity that exists right now,” said Penn Bowers, an analyst with CLSA Asia-Pacific Markets in Tokyo. The government may be close to nationalizing Tepco to spin off its viable assets, he said.

The March 11 nuclear disaster, the worst in 25 years, caused the evacuation of about 160,000 people and dumped radiation on farms and into the sea, contaminating food supplies. Tepco said it will outline a plan today to reorganize to meet claims that may total 4.5 trillion yen by March 2013, according to a government panel.

Tepco may also raise electricity prices to help pay for decommissioning the damaged reactors at the Fukushima Dai-Ichi plant, Nishizawa told the newspaper.

Tepco spokesman Masato Yamaguchi referred inquiries to a statement yesterday from the company that said plans on government support haven’t been finalized. Yamaguchi spoke in a telephone interview today.

Public Support

The company’s shares fell more than 10 percent yesterday after the Mainichi newspaper reported the company will be taken over by the government. The stock rose as much as 4 percent to 254 yen in Tokyo and was at 250 yen at 10:45 a.m.

The shares have lost 88 percent of their value since the March 11 earthquake and tsunami wrecked its Fukushima Dai-Ichi atomic plant.

The government’s Nuclear Damage Liability Facilitation Fund may buy preferred shares worth at least 1 trillion yen ($12.9 billion) from the utility by next summer, the Mainichi said yesterday, without saying where it obtained the information.

The Sankei newspaper reported the government may inject 1.5 trillion of public funds, while Kyodo News reported Tepco may seek 3 trillion yen, including public funds and loans, during the four years from April.

The government, which agreed to provide about 900 billion yen to support Tepco in November, is leaning toward buying shares because it’s becoming likely liabilities will exceed its assets, a situation that may result in the company seeking bankruptcy protection, the Mainichi report said. The preferred stock will be convertible into common shares, the report said.

Maintaining Supplies

Officials want to keep the company running to maintain stable power supplies, the report said. Tepco wants to remain a private entity and isn’t planning to seek a capital injection, Nishizawa said on Nov. 4.

Yukio Edano, minister for trade and industry, has said a court-led bankruptcy must be avoided as it would give preferential claims to bondholders and other creditors, not those directly affected by the disaster.

Tepco, which has racked up losses of 1.8 trillion yen since the disaster, is forecasting a loss of 600 billion yen in the year to March 31.

--Editors: Aaron Sheldrick, Peter Langan

To contact the reporters on this story: Chisaki Watanabe in Tokyo at cwatanabe5@bloomberg.net; Stuart Biggs in Tokyo at sbiggs3@bloomberg.net

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


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