ID :
189984
Tue, 06/21/2011 - 07:14
Auther :

TEPCO's Possible Delisting Remains Market Talk

Tokyo (Jiji Press) - Speculation continues about whether Tokyo Electric Power Co. <9501> can remain listed in the face of huge compensation payments related to the nuclear crisis at its Fukushima No. 1 power plant despite the government's decision to support it.
The government last Tuesday endorsed a bill to help Tokyo Electric meet demands for compensation, declaring that it will prevent TEPCO, as the utility is known, from falling into a negative net worth, or liabilities in excess of assets.
TEPCO can recover the cost of compensation payments because it has an "excellent" customer base, says a government official.
A senior official at the Ministry of Economy, Trade and Industry added that TEPCO could earn 200 billion yen in profit a year under a yet-to-created mechanism for compensation payments. In other words, electricity charges will be the base of payments, according to the bureaucrat.
Under a bill aimed at "minimizing the burden on the people," a new organization would be established, with capital contributions from electric power companies, to provide financial assistance to TEPCO in cooperation with the government.
But the company faces a tough financial situation even after support from the planned entity and the government is taken into account. Huge expenditures will be needed to address the accident at the Fukushima plant, crippled by the March 11 earthquake and tsunami, and decommission the reactors there.
In addition, a shift from nuclear to thermal power generation will lead to higher fuel costs, which will be passed on to users in the form of higher electricity bills.
Compensation payments for individuals and businesses affected by the nuclear crisis are now estimated at several trillion yen, but the figure may grow further, depending on the scale of damages and the number of victims.
TEPCO therefore will have to use most of its profits for compensation for a long period of time.
If the compensation payments turn out to be far in excess of TEPCO's capacity, the company may fall into a negative net worth and become subject to delisting.
In such a situation, it is questionable whether the government could continue passing bills on to the public to support TEPCO without having the holders of the company's shares and bonds, as well as its creditors, also take some responsibility.
In view of its pledge to minimize the public financial burden, the government will likely urge TEPCO to carry out more restructuring and self-support measures to pave the way for a huge injection of public funds.
If the TEPCO resorts to a large-scale capital reduction as a result, the government may acquire a major stake in the company through an injection of taxpayer money, making it difficult to keep the utility listed.
Some government officials are starting to say that TEPCO will be treated in a manner similar to legal bankruptcy proceedings and will be delisted after the amount of compensation payments is determined.
Even if the utility remains listed, the question of compensation is unlikely to be settled without shareholders taking their part of the responsibilities.


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