Tepco in talks for $25 billion in funding from Japanese banks
23 Mar 2011
Beleaguered Japanese utility Tokyo Electric Power Co (Tepco) is in talks with banks and other lenders for loans worth up to $25 billion to help it overcome the crisis caused at its Fukushima Daiichi nuclear power plants, following the earthquake and tsunami.
Tepco's scrip has been hammered on the stock markets by punters fearing that the company could become bankrupt. It has lost more than 50 per cent value since the March 11 quake, which was followed by a massive tsunami that shut down its nuclear plants.
The company will need billions of dollars in funds to repair the damaged power plants and for compensating victims following radiation leaks at its north Japan nuclear power plants.
According to sources in Tokyo, Tepco is seeking huge loans from Japanese banks and trusts to help rescue it from the crisis. The top three banking groups being mentioned include Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group. It is also learnt to be in talks with four trust banks – Sumitomo Trust & Banking Corp., Chuo Mitsui Trust Holdings Inc., Mitsubishi UFJ Trust & Banking and Mizuho Trust & Banking Co.
Tepco's credit rating was downgraded by Moody's and Standard & Poor's following the nuclear crisis, making it difficult for it to issue bonds. ''While we have enough liquidity in hand, we expect our borrowing needs to increase next fiscal year and will raise funds as needed,'' said Hajime Motojuku, a Tepco spokesman.
Japanese banks are flush with cash following years of stagnant growth in the economy, when domestic companies did not seek funding. The banking sector has also performed well, and in the first-half of the current fiscal has come with record high profits. The Bank of Japan has also said it would provide abundant liquidity to the system and would pursue monetary easing measures to ensure financial stability.
But the Japanese economy is suffering from a range of maladies including an ageing society, high unemployment, high debt-to-GDP ratio, a strengthening currency and deflation.
While the economy expanded by 2.8 per cent last year, it is projected to grow at 3.3 per cent in the current fiscal. Last year, China overtook Japan and emerged as the world's second-largest economy after the US.
