Japan: Tepco bailout

Investors Of Japan’s Most Hated Corporation, TEPCO, To Be Bailed Out Forever

Wolf Richter

Testosterone Pit,

25 September, 2013

TEPCO, the mega-utility with about 49,000 employees that owns the Fukushima Daiichi nuclear powerplant where three reactors have melted down, and whose lackadaisical handling of the fiasco has been a fiasco in itself, has already been bailed out with taxpayer money shortly after the disaster.

And it’s getting more open-ended taxpayer support as the government decided to step in and deal itself with the problem of highly radioactive groundwater that is leaking into the ocean at a rate of 300 tons per day, according to the latest estimates. But now the government said: let’s not hurt the investors!

The technologies for dealing with the groundwater contamination have yet to be invented. One of the measures bandied about is to install giant refrigeration equipment to freeze the soil around the reactor and turbine buildings; it would stop the oncoming groundwater from surging into the buildings. Realistic or not, the costs are enormous and mounting. So the government decided last month that the taxpayer will pick up the tab. Now the question is being debated if TEPCO, in return, should go into bankruptcy and be liquidated.

In such a scenario, the operating company might be taken over by the government. Stockholders and bondholders would get to fight over their then mostly worthless scraps in court. It would be logical: Taxpayers fund the endless costs of the cleanup – the latest plan estimated decommissioning the plant, assuming it doesn’t blow up first, would take 40 years. In return, they’d benefit from future profits of TEPCO’s vast non-Fukushima operations.

Those profits are substantial: for its first quarter, ending June 30, the company reported a profit of ¥438 billion ($4.3 billion), up from a loss of ¥288 billion in the quarter a year ago. Revenues jumped 9.8% to ¥1.44 trillion after the company had jacked up its electricity rates. These profits over time would allow taxpayers to recoup part of the cleanup, mitigation, and decommissioning costs.

But Industry Minister Toshimitsu Motegi, who heads the government’s task force that has been put in charge last month of the groundwater cleanup efforts, told the Asahi Shimbun that TEPCO should not be liquidated. In other words, the institutions holding these otherwise toxic bonds and worthless shares should be bailed out again, and forever, particularly the sacrosanct bondholders, at the expense of taxpayers. He, who should be the representative of those who elected him, has now revealed himself to be a lobbyist for TEPCO and its institutional investors.

To support his position, he was fear-mongering where he thought it would hurt the most: “If TEPCO is liquidated, there is a possibility that the right of victims of the nuclear accident to receive compensation will not be met,” he said. Spurious, since the government, as part of its original bailout, decided to fund most of those claims because TEPCO couldn’t or wouldn’t meet them.

And he threatened, also spuriously, that “companies engaged in the solution of the various problems resulting from the disaster” – the whole process is already mired in allegations of mismanagement, negligence, and corruption – “will not be able to receive payment for their work.” OK, some contractors might have trouble collecting on their most recent invoices, though that could be solved too. But he forgot to mention that the new operating company, post-liquidation, whoever owned it, would continue the cleanup operations and pay contractors.

“There would be big adverse effects,” was his omnibus warning. Indeed, there would be, but for bondholders and stockholders. And as if that weren’t enough, he added for good measure, “Besides, the supply of electricity could become unstable.”

I mean, come on! The bankruptcy of a utility doesn’t impact the generation and distribution of electricity – see TXU, the mega-utility in Texas, for example. That comment was one more data point in how the Abe administration, a great proponent of the nuclear industry and of Japan Inc. in general, is trying by hook or crook, and even by convoluted fear mongering, to restore the nuclear industry’s mantle of invulnerability.

The nuclear fiasco in Japan has shaken the omnipotent nuclear industry – and government agencies that aided and abetted it. Yet they still obfuscate the consequences of the triple melt-down – including for example, that the number of workers at the plant with cancer-inducing radiation doses in thyroid glands was eleven times higher than disclosed last December. Read.... “Who Could Trust Such A Company?” – The Big Fat Lies About Radiation Exposure Of Workers At Fukushima