Tepco confusion | FT Alphaville

Tepco confusion

The latest kerfuffle about the future of Tokyo Electric Power Co, the power provider and operator of Japan’s crippled Fukushima nuclear power plant, began quietly enough, with a small report in the Mainichi Daily newspaper, claiming the Japanese government was considering taking a stake of up to 50 per cent in the utility.

The report cited an unamed government official saying the government was considering taking a stake as public funds may be necessary to ensure Tepco can supply electricity to Tokyo in the summer and also pay compensation to companies and individuals hit by the nuclear plant crisis. Any stake would not exceed 50 per cent and the government may also offer a loan guarantee, the offical added.

Rumours of possible nationalisation or break-up have plagued Tepco since the quake. But this was one of the strongest signals yet that the government may yet end up a part-owner of the most villified company in Japan (and possibly the world, right now).

With no immediate clarification coming from the company or the government, the stock — which has collapsed since the March 11 earthquake and tsunami struck the facility — slumped another 7 per cent to Y433, a far cry from Y2,153  on March 10. The fresh slide followed an odd uptick of nearly 7 per cent in Tepco’s share price on Thursday, which some traders attributed to rumours of government deliberations over part-nationalisation.

Adding to the company’s troubles, Moody’s on Thursday lowered Tepco’s credit rating by three notches to Baa1 from A1 and said further cuts may be necessary. Problems at the damaged plant “appear far from being resolved” and the utility was likely to remain unprofitable for a long time, the ratings agency said.

Later on Friday, Japan’s trade minister Banri Kaieda trying to calm things down, told Kyodo that the government had “yet to debate” the possibility of nationalising or taking control of Tepco but may set up a team to discuss Tepco-related compensation issues. The company, he acknowledged, faces a huge potential compensation bill.

The only response from Tepco was mystification, as Reuters reports on Friday:

Tokyo Electric Power Co said on Friday that it was unaware of any government plan to inject public funds into it and that now was not the time to discuss the future structure of the company.

Government bail-out or not, for anyone holding Tepco shares, Bloomberg’s headline” on Friday provided little comfort: “Tepco shareholders may be wiped out after nuclear crisis”.

Meanwhile, around-the-clock work on the stricken Fukushima nuclear plant has achieved little to inspire confidence. As the Wall Street Journal noted on Wednesday, options at the plant are now a “calculated choice between bad and worse”.

Even so, Japan’s chief cabinet secretary Yukio Edano told the FT on Thursday that while stabilising the plant “may take years”, the government hopes to prevent any further deterioration of the plant and stem the leakage of radioactive material into surrounding areas within a matter of weeks. “If we can stop those developments, and remove people’s fears, then that may also be viewed as a sort of stability,” he said.

And that was the good news…

Related links:
Plutonium Detected at Nuclear Plant – WSJ
Japanese utilities have a ‘Tepco moment’ – FT Alphaville
Japan: media hysteria and the nuclear backlash – FT Alphaville
Japan earthquake coverage – FT Alphaville