The Japanese government has approved amendments to Tokyo Electric Power Company's (Tepco's) ten-year special business plan which effectively puts it, at least temporarily, under state control.
Under the amendments, approved by trade and industry minister Yukio Edano, the government will provide Tepco with ¥1 trillion ($12.5 billion) in state funds in return for a majority stake in the company. Having more than half of Tepco's voting rights will enable the government to push through reforms at the company. The transaction - which will bring the total amount of public funds provided to Tepco to some ¥3.5 trillion ($43.8 billion) - must be approved by a meeting of Tepco's general shareholders in June. The move, if approved, could avoid the collapse of the utility, which is struggling to meet massive compensation and clean-up costs following the Fukushima accident last year.
Also under the special business plan - submitted by Tepco and the Nuclear Damage Liability Facilitation Fund in April - the company will receive an additional ¥1 trillion ($12.5 billion) from major creditors, as well as aid of ¥850 billion ($10.6 billion) from a government-backed bailout body for use in compensation payouts.
As part of this, Tepco will be required to increase its electricity prices, bring about management changes, sell some of its assets and undertake major cost-cutting measures. The company plans to increase electricity rates to both its domestic and commercial customers by 10% and 17% respectively, as well as selling or leasing some of its thermal power plants. It has recently announced the selection of a new government-approved chairman and president. Their appointments are to be formalised by Tepco's board following next month's shareholders' meeting. Tepco has pledged to cut costs by ¥3.3 trillion ($48.1 billion) over the next ten years.
The company is also relying on the restart of the seven reactors at its Kashiwazaki Kariwa plant in Japan's Niigata prefecture to help improve its profitability. Assuming that the electricity price hikes and reactor restarts are approved, Tepco anticipates returning to profitability in financial year 2013/14.
Edano commented, "Without state funds, Tepco cannot provide a stable supply of electricity and pay for compensation and decommissioning costs." However, he indicated that the government only intends to hold a majority stake in the company until it has met its obligations and is operating profitably again. "Even though the firm will be under so-called state control, I want the company to do its best to step out of this situation soon," he said.
Researched and written
by World Nuclear News