Japan's Government to Take Over TEPCO

Japan’s trade minister last week approved a ¥1 trillion ($12.5 billion) capital injection to avert the collapse of the Tokyo Electric Power Co. (TEPCO). The move is effectively a nationalization of Japan’s largest utility and owner of the crisis-stricken Fukushima Daiichi nuclear plant.

Japan’s government has spent at least ¥3.5 trillion since the earthquake in March 2011 triggered meltdowns at Fukushima. Experts say that the nuclear disaster could cost more than $100 billion, factoring in compensation and clean-up costs.

"Without the state funds, [TEPCO] cannot provide a stable supply of electricity and pay for compensation and decommissioning costs," Trade and Industry Minister Yukio Edano told reporters last week, after the government approved the utility’s 10-year turnaround plan.

If approved by shareholders in June, the takeover will enable the government to get more than half of TEPCO’s voting rights, allowing it to choose board members. Through convertible stock, the government will also increase its control to more than two-thirds, allowing it to make decisions on management and mergers.

Under the turnaround plan, TEPCO could sell or lease some of its thermal power plants and increase electricity rates.

TEPCO on Monday posted a net loss of ¥781.64 billion ($9.78 billion) for fiscal year 2011, which starts and ends in March. Last year, just weeks after the Fukushima crisis, the utility posted a ¥1.247 trillion loss—the most claimed by any company in Japan’s corporate history.

But the utility forecasts it will lose only ¥100 billion this fiscal year as a result of electricity rate hikes that could increase revenues, already worth ¥6.025 trillion, by as much as 13%, Despite public pushback, TEPCO increased prices by 17% for commercial customers in April and it plans to hike residential power prices by 10% in July. The higher rates are necessary as TEPCO attempts to close, with expensive fossil fuels, the nuclear gap left by the damaged Fukushima Daiichi units and other nuclear power plants that have been shut down for inspection, the company says.

See the forthcoming June issue of POWER for a detailed look at Japan’s efforts to restabilize its power generation sector.

Sources: POWERnews, TEPCO, METI