A government plan to bring Tokyo Electric Power Co. under state control to secure decommissioning costs for the crippled Fukushima No. 1 nuclear power plant faces opposition from the utility among many other hurdles.
A government plan to bring Tokyo Electric Power Co. under state control to secure decommissioning costs for the crippled Fukushima No. 1 nuclear power plant faces opposition from the utility among many other hurdles.
Under the plan being discussed within the government, the government-backed Nuclear Damage Liability Facilitation Fund would invest about 1 trillion yen ($12.87 billion) in TEPCO to secure more than two-thirds of its shares.
The investment is designed to ensure that TEPCO will have access to sufficient funds for decommissioning the Fukushima No. 1 plant.
A government third-party committee estimates that about 1.15 trillion yen will be required to decommission the No. 1 to No. 4 reactors damaged by the Great East Japan Earthquake. The No. 5 and No. 6 reactors may have to be decommissioned.
“It is difficult to come up with reliable estimates at the moment," industry minister Yukio Edano acknowledged.
TEPCO is opposed to accepting the corporation's investment, afraid of losing management independence.
The government expects that TEPCO executives, including Chairman Tsunehisa Katsumata, will step down once the utility comes under state control.
An equity stake of more than two-thirds would enable the Nuclear Damage Liability Facilitation Fund to make key management decisions, such as executive appointments.
The government-backed agency will borrow funds to buy new TEPCO shares from banks with a guarantee that the government will repay the loans if the utility becomes insolvent.
TEPCO officials have not accepted the government's argument that the investment is necessary to secure decommissioning costs, according to sources.
A government official defended the plan to invest public funds, instead of arranging for private-sector loans.
"We can ask banks to lend for capital expenditures, which can produce profits," the official said. "But the spending on decommissioning and other measures to deal with the accident will not generate any profits."
Still, the government plans to ask banks to lend an additional 1 trillion yen to TEPCO.
"TEPCO's creditors will be asked to fulfill their responsibilities by providing the same amount of money as the corporation's investment in new loans," a government official said.
The financial institutions are wary, saying it is unclear whether the utility will be able to repay the loans.
The government hopes to persuade creditors to extend new loans by improving TEPCO's capital-adequacy ratio with public investment.
The Nuclear Damage Liability Facilitation Fund has set two preconditions for the investment and loans--allowing TEPCO to raise electricity charges by up to 10 percent in October 2012 and restarting the Kashiwazaki-Kariwa nuclear power plant as early as fiscal 2013.
But it will be tough for the government, which is seeking a consumption tax hike, to authorize a substantial increase in electricity rates.
It is also unclear whether local governments will approve the plan to put the Kashiwazaki-Kariwa nuclear power plant back online.
The government hopes that about 2 trillion yen of the proposed investment and loans, plus TEPCO's own funding, will be enough to cover the decommissioning outlays and mounting fuel costs.
In fiscal 2011, TEPCO's fuel costs will increase about 800 billion yen from a year earlier because thermal power plants have been mobilized to make up for lost capacity at nuclear power plants shut down since the March 11 disaster.
The public investment is also designed to prevent TEPCO's debts from exceeding its assets in fiscal 2012, due mainly to the decommissioning costs.
Decommissioning outlays could increase, however, depending on the conditions of the reactors. One private-sector think tank put the tab as high as 15 trillion yen.
Once TEPCO is put under state control, the government will wield a stronger influence over the entire electric power industry. That could lead to drastic reforms, such as a review of regional monopolies and a separation of electricity generation and transmission operations.
The government has started discussions on how to reform the industry following the accident at the Fukushima No. 1 nuclear power plant. Industry minister Edano has assembled a private research group on the issue.
This article was written by Tetsuo Kogure and Toru Nakagawa.