Japanese govt takes over disaster-struck Tepco

The Japanese government yesterday approved a restructuring plan for utility giant Tokyo Electric Power Company, effectively nationalising the owner of the tsunami-struck Fukushima nuclear power plant.

The government said that it would bail out the struggling power utility by pumping in ¥1 trillion ($12.5 billion) for acquiring a controlling stake of over 50 per cent, in one of the biggest nationalisations ever. It will also hold the future rights to additional one-sixth of the company's shares if it deems necessary. Financial institutions may provide extra funding as required.

According to the 10-year restructuring plan, Tepco will be under temporary state control, with a plan to enable it to attain profitability within two years and possibility of subsequent return to the bond market. The company intends to cut its costs by more than ¥3 trillion over the next decade.

Tepco shares surged 17 per cent to ¥216 before closing 6.5 per cent up at ¥196 Thursday on the Tokyo Stock Exchange on the news.

Tepco's new plan would also involve increasing the power tariffs for households by 10 per cent along with already announced steeper rises for corporate consumers.

The restructuring plan submitted by Asia's largest private utility was under debate for the past few months. It aims to ensure compensation for the victims of the Fukushima Daiichi nuclear power plant devastated by the earthquake and tsunami in March 2011 and cleaning up of the damaged reactors and spent fuel pools, besides maintaining a steady power supply.

Although no fatalities have been reported following the nuclear calamity, nearly 100,000 people have been evacuated due to radiation threats from the damaged plant, besides causing disruption of economic activity in the region.