By Jonathan Soble in Tokyo
Japan?s government will inject Y1,000bn ($12.9bn) of fresh capital into Tokyo Electric Power (Tepco), owner of Fukushima Daiichi nuclear power plant, effectively nationalising the financially-strapped utility, according to people familiar with the matter.
Tepco?s shares closed up 5.5 per cent on Thursday in response to news that a deal was imminent and the company is expected to make a final decision on the fundraising by mid-February.
Tepco, which is Asia?s largest private utility by sales, has lost about 85 per cent of its market value since reactors at the Fukushima plant melted down last March in the wake of Japan?s earthquake and tsunami.
The government?s cash injection would be matched by a roughly equal amount of loans from Tepco?s private- and public-sector banks, people involved said. The institutions are offering to provide the additional financing, at relatively low rates, in exchange for not having to write off any of Tepco?s outstanding Y7,800bn of debt.
But the key issue yet to be resolved is how much control over Tepco?s management the state will acquire for its money. At the company?s current market capitalisation, a Y1,000bn investment would give the state a roughly two-thirds stake in the utility, turning it into a public sector entity.
Tepco executives and some government officials are arguing that Tepco should issue a mix of voting and non-voting shares in order to keep formal government control below 50 per cent.
That could allow Tepco management to resist proposed industry reforms, such as the separation of utilities? generation and transmission businesses, but some say it could also help insulate taxpayers from liability claims related to the Fukushima disaster.
The government has already stepped in to help Tepco cover the cost of indemnifying Fukushima residents and cleaning up the area – an amount estimated at Y4,700bn but likely to rise. Under a deal struck last June, taxpayers will pay those costs until Tepco returns to profit, and then will be repaid out of Tepco?s earnings over a still unspecified number of years, probably a decade or more.
? The Financial Times Limited 2012