The Washington Post

Japan to provide $12.6 billion to Tepco, operator of tsunami-ravaged nuclear plant

An employee stands in front of Tokyo Electric Power Co.'s Kawasaki Thermal Power Plant in Kawasaki City. Bailout gives government control of the massive utility company as it continues recovery from tsunami disaster. (Tomohiro Ohsumi/Bloomberg News)

Japan’s government on Wednesday approved a 1 trillion-yen, or $12.6 billion, bailout for the operator of the disaster-stricken Fukushima nuclear plant, putting the giant utility under temporary state control as it continues to deal with the extensive damage at the facility.

The move, which had been widely expected, will prevent the Tokyo Electric Power Co., known as Tepco, from collapsing. With the newly authorized public funds, the company can decommission the stricken reactors at the plant on Japan’s northeastern coast, pay compensation to the tens of thousands of people who fled as radiation spread and provide electricity to its 45 million customers.

The bailout also gives the government a majority share of the former monopoly, a change that will formally take place after Tepco’s annual shareholders meeting next month, according to the Kyodo news agency. Tepco will be forced to follow a restructuring plan that includes electricity rate increases, management changes and $41.4 billion in cost-cutting measures over the next decade.

“Without the state funds, [Tepco] cannot provide a stable supply of electricity and pay for compensation and decommissioning costs,” said Industry Minister Yukio Edano, who approved the takeover plan.

Tepco fell into financial crisis last year after a triple meltdown at the Fukushima Daiichi plant, where primary and backup cooling systems were knocked out by the 9.0-magnitude earthquake and ensuing tsunami of March 11, 2011. The company, much-criticized for its safety oversights at the plant, will need decades to decommission the now-stabilized reactors, as well as trillions of yen for cleanup.

The government, policy experts say, could use its control of Tepco to spearhead changes in Japan’s traditional system of electricity distribution, long dominated by regional monopolies whose charges are among the world’s highest. The government could open the electricity grid to competitors, a step Edano has advocated. The industry minister had also threatened to allow Tepco to fail if it did not agree to a management overhaul.

Tepco has selected a new government-approved chairman, Kazuhiko Shimokobe, a bankruptcy lawyer and corporate restructuring specialist. Shimokobe recently oversaw the Nuclear Damage Liability Facilitation Fund, a public body created to help Tepco pay compensation to nuclear evacuees.

Tepco remains the sole provider of electricity for a large swath of eastern Japan, including Tokyo. The utility, according to its government-submitted recovery plan, wants to restart seven idled reactors at its Kashiwazaki Kariwa nuclear plant, on Japan’s western coast.

In the aftermath of the March 11 disaster, however, the Japanese public — along with many local officials — has come out strongly against nuclear power. That opposition has quickly turned Japan into an essentially non-nuclear nation. Mandatory, every-13-month checkups for reactors have turned into open-ended shutdowns as the central government finds itself unable to win local approval for the restarts. This past weekend, Japan took its last operating reactor offline, completely removing nuclear power from the grid for the first time in more than four decades.

In addition to the seven-unit Kashiwazaki Kariwa plant in western Japan and the six-unit Fukushima Daiichi facility, Tepco also operates the four-unit Fukushima Daini plant, which was shut down immediately after the disaster.

Chico Harlan covers personal economics as part of The Post's financial team.
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