Bloomberg News

Tepco Widens Full-Year Loss Forecast as Fukushima Costs Rise

February 13, 2012

(Updates with bailout talks in ninth paragraph.)

Feb. 13 (Bloomberg) -- Tokyo Electric Power Co., which received an $8.9 billion lifeline from the Japanese government, widened its full-year loss forecast as compensation and clean-up costs rose after the Fukushima nuclear disaster.

The company known as Tepco expects losses for the year to March 31 to be 695 billion yen ($8.9 billion), from a November estimate of 600 billion yen, it said in a statement today. The company, which has 29 million customers in and around Tokyo, had a loss of 1.25 trillion yen last fiscal year.

Tepco today received extra aid of 689.4 billion yen from the government and is seeking a larger bailout of as much as 2 trillion yen as it sits on the edge of bankruptcy. Japan’s trade and industry minister, Yukio Edano, today told Tepco President Toshio Nishizawa the government won’t approve the broader package unless it gets management control and voting rights.

“It’s all part of a game of chicken,” said Hirofumi Kawachi, a Tokyo-based energy analyst at Mizuho Investors Securities Co. By resisting government control “Tepco is essentially holding its customers in the political and financial centers of Japan hostage.”

The company is proposing increasing prices for households to help cover the cost of using fossil fuels to produce electricity now that all but one of its 17 nuclear reactors has been shut down. Edano has told Nishizawa Tepco needs to recover public trust before raising tariffs.

Rising Compensation

The utility, which is still struggling to control temperatures at the stricken plant north of Tokyo, in December raised its estimate for compensation payments to those affected by the disaster to 1.7 trillion yen. A government panel estimates payments will reach 4.5 trillion yen by March next year.

The company needs to show its commitment to becoming “a newborn Tepco” after widespread criticism of its handling of the disaster, Edano said last week. The government has set up a fund to handle compensation claims and avert a collapse of the company.

“If Tepco wants a capital injection from the fund, the plan must also include ways to preserve the capital as well as achieve the purpose of the capital injection,” Edano told Nishizawa and officials of the fund at the meeting in Tokyo today. “If Tepco submits a plan seeking capital injection without sufficient voting rights reflecting the size of the injection, I have absolutely no plans to approve it as long as I’m in this position.”

Bailout Talks

Tepco is in talks with banks and the government’s Nuclear Damage Liability Facilitation Fund to raise loans, two people with knowledge of the negotiations said earlier. The banks will lend 1 trillion yen each to the company and the same amount to the fund, which would use the money to buy the utility’s shares, the people said.

The utility’s management is resisting giving up control to the government and wants to keep the ratio of the fund’s voting rights to less than 50 percent, one of the people said. The government may obtain more than one-thirds of voting rights to have power of veto, the Asahi newspaper reported on Feb. 10.

Tepco will draw up a business plan by the end of March that reflects Edano’s comment on the government’s management rights, Nishizawa said today at the company’s earnings briefing in response questions on the bailout. He declined to comment further.

The company booked an extraordinary gain of 1.62 billion yen reflecting the aid payments from the government, it said in a statement. Tepco wrote down 2 trillion yen on a non- consolidated basis to cover compensation payments.

Decommissioning Costs

The full-year loss forecast was increased after the company booked more decommissioning costs, Katsuyuki Sumiyoshi, general manager of Tepco’s accounting and treasury department, said today at the earnings briefing.

Tepco said its fuel bill for the full year will probably rise by 760 billion yen. The utility said earlier its fuel costs will increase by 830 billion yen to 2.31 trillion yen as it uses more thermal power plants to fill the void left by nuclear stations that were damaged or shut for safety checks.

Tepco, which earlier pledged to cut 7,400 jobs as part of cost reductions, has seen a three-fold increase in the number of staff quitting compared with recent years, Nishizawa said. He declined to give numbers.

The shares rose 0.5 percent to close at 201 yen before the earnings were released. About $40 billion of Tepco’s market value has been wiped out since the day before the March 11 earthquake and tsunami caused reactor meltdowns at the Fukushima Dai-Ichi plant 220 kilometers (137 miles) north of Tokyo.

Temperatures Rise

The worst nuclear disaster since Chernobyl in 1986 led to about 160,000 fleeing radiation and damaged fisheries, farms and forestries in Fukushima prefecture in northern Honshu, Japan’s most populous island.

The company is also coping with rising temperatures inside the No. 2 reactor, one of three that melted down at the plant. One of three thermometers indicated the temperature at the bottom of the reactor pressure vessel rose to 93.7 degrees Celsius (200.7 Fahrenheit) today, higher than the 80 degrees limit set by the government, Ai Tanaka, a spokeswoman for the utility known as Tepco, said by phone today.

There are no signs of isotopes that would suggest the reactor has gone critical and there’s been no increase in radiation around the site, the company said in a statement. The other two thermometers at the bottom of the vessel showed temperatures of 32.8 degrees and 33.1 degrees earlier today, spokesman Naohiro Omura said. The thermometers have a margin of error of as much as 20 degrees.

“We think the thermometer may be faulty,” Omura said. The other two gauges indicate temperatures are falling, he said.

Tepco and Japan’s government announced on Dec. 16 they succeeded in bringing the reactors into a safe state known as cold shutdown, a claim that has been contested by some independent observers.

--Editors: Aaron Sheldrick, Teo Chian Wei

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: Teo Chian Wei at cwteo@bloomberg.net


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