Tepco will be nationalized by a government that is sinking in debt and ready to collapse itself.
Tepco To Be Nationalized As Early As July
Tokyo Electric Power Co. will try to get back on its feet as a state-owned entity under a business plan that will transfer management control to the government as early as July in exchange for a taxpayer bailout.
28 April, 2012
Tepco, as the utility is known, and the government-backed Nuclear Damage Liability Facilitation Fund submitted the plan on Friday to Economy, Trade and Industry Minister Yukio Edano, who is expected to grant his approval in early May.
With the long-awaited deal, the nation's largest utility will finally move forward with turnaround efforts. Heavy compensation expenses and raising costs of radiation clean-up have depleted Tepco's coffers, forcing the utility to give up more than 50% voting rights.
Under the plan, Tepco will receive 1 trillion yen in capital in exchange for special-class stock that is not traded on the market, after its shareholders' meeting scheduled for the end of June. The government has the option of increasing its voting rights from more than half to at least two-thirds if Tepco's restructuring efforts stall. A two-thirds stake would give the government the power to make management decisions, such as mergers.
A management reform team composed of junior- and mid-level Tepco employees as well as staff from the compensation fund will be established after the shareholders meeting, according to Tepco's incoming chairman, Kazuhiko Shimokobe. This team will advise Shimokobe, the current head of the fund's main committee, who has no experience running a company.
The business plan is premised on a hike in household electric rates and the restarting of Tepco's Kashiwazaki-Kariwa nuclear plant in Niigata Prefecture, both of which lack public support. A 10% hike would increase a typical household's monthly bill by about 600 yen.
Raising household rates "is something that needs to be done at some point in order to ensure a stable power supply," said Shimokobe. "I will make every effort to win public understanding."
As for restarting the idled reactors, Shimokobe emphasized that "maximum security" will be a condition for restarting nuclear reactors.
Touching on his management responsibility, Tepco President Toshio Nishizawa said that he will "make announcements after the firm releases its business results in May," indicating that a new management team, including his successor, will be unveiled around the middle of next month.
The business plan calls for cutting costs to the tune of 3.3 trillion yen over 10 years, through such steps as reducing expenses for material procurement and personnel.
Tepco's transmission, retail and fossil-fuel segments will be turned into in-house companies in the second half of the fiscal year to make them more independent. A shift to a holding company structure may take place in the future. This would facilitate the forming of tie-ups with other firms, which could result in lower costs for fuel procurement and upgrading fossil-fuel plants.