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Japan eyes state-backed insurer to save TEPCO

(Agencies)
Updated: 2011-04-15 16:46

Tokyo Electric Power Co (TEPCO), the operator of Japan's crippled Fukushima Daiichi Nuclear Power plant, President Masataka Shimizu attends a news conference in Tokyo April 15, 2011. Tokyo Electric Power said on Friday provisional compensation would cover 50,000 households in the evacuation and 'stay inside' zones near the plant, totalling around 50 billion yen ($599 million). [Photo/Agencies]

TOKYO - Japan plans to set up a government-backed insurance fund to put money into Tokyo Electric Power and pay compensation stemming from the disaster at its Fukushima Daiichi nuclear plant, the Nikkei newspaper said.

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Aimed at saving Tokyo Electric from collapse, the plan would have the state initially shoulder the massive compensation costs, which the power company would then repay over several years via special dividends, the paper said.

Asia's largest utility, also known as TEPCO, has yet to determine how much it will have to pay residents and business near the Fukushima plant, who were forced to evacuate after the March 11 earthquake and tsunami caused deadly radiation leaks.

"The bottom line is, TEPCO is too big to fail," said Jason Rogers, a credit analyst at Barclays Capital in Singapore.

"But that is not to say they won't be held accountable. It's impossible to quantify the financial impact at this point, but this disaster is likely to drag on for some time."

TEPCO, which supplies roughly a third of electricity in the world's third-largest economy, had $91 billion of debt on its books before the March crisis, and has since taken on a $24 billion bank loan.

JP Morgan has estimated TEPCO could face 2 trillion yen ($24 billion) in compensation losses in the financial year that started this month, while Bank of America-Merrill Lynch has said the bill could reach $130 billion if the crisis continues.

TEPCO will make an initial compensation payment of 50 billion yen, President Masataka Shimizu told a news conference on Friday, adding he did know how much the final bill would be.

Facing sometimes hostile questions from reporters, Shimizu said the power company would be aggressive in cutting costs.

"We want to streamline operations with no exceptions in what we consider," he said during the conference, where he apologised and bowed.

"We are obviously thinking about pay cuts for our board and managers."

Japanese media later reported TEPCO will sell $1.2 billion worth of real estate to help pay victims. No one was available for comment at the utility.