TEPCO Saved By $12.5 Billion Bankruptcy Bailout From Japanese Government

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(Photo: Stock.xchng)
(Photo: Stock.xchng)

WORLD

  • Bailout puts Tokyo Electric Power Co under temporary state control
  • 10-year restructuring plan includes cost cutting measures, new management and increased energy costs
  • Japanese public distrustful of nuclear power in the wake of the Fukushima Dai-ichi nuclear plant meltdown in 2011

The Japanese government has agreed to pay Tokyo Electric Power Co., one of the world’s largest utilities, a $12.5 billion bailout as part of a 10-year restructuring plan that will save TEPCO from bankruptcy; it also places TEPCO under temporary state control.

TEPCO has been in financial crisis since the March 11/11 Fukushima Daiichi nuclear plant meltdown, which followed a 9.0 magnitude earthquake. The company still owes billions of dollars in compensation claims and must pay cleanup expenses. It is expected to take decades to stabilize the Fukushima reactors and cleanup the area.

In early May, TEPCO submitted its restructuring plan to the government-backed Nuclear Damage Liability Facilitation Fund, which approved the plan. The bailout will be official at TEPCO’s June shareholders meeting.

Yukio Edano, the industry minister who approved the plan, says: “Without the state funds, [TEPCO] cannot provide a stable supply of electricity and pay for compensation and decommissioning costs.” The restructuring plan includes cost cutting measures, new management and increased energy costs. TEPCO has already replaced its chairman and its managing director.

In the wake of the approval, TEPCO creditor banks offered the company an additional $12.5 billion in loans.

Breaking Up Japan's Utilities Monopoly

Nationalizing TEPCO could be the first step in breaking up Japan’s utilities monopoly. Japan’s energy is controlled by a small number of regional utility companies who charge some the highest prices in the world.

TEPCO has 45 million customers in Eastern Japan, including Japan’s largest city Tokyo.  Customers are expected to see about a 10% increase in the cost of services.

The Japanese public grew distrustful of nuclear power following the Fukushima disaster, and it is the first time in 40 years in that the nation has not been dependant on nuclear power.

TEPCO has been criticized for its role in the Fukushima disasters, with critics claiming TEPCO was unprepared for natural disasters affecting its reactors.

As part of the restructuring plan, TEPCO would like to restart seven reactors in western Japan.

Key Statistics - Nuclear Energy in Japan (source: World Nuclear Energy Association)

  • Nearly 84% of Japan’s energy requirements must be imported.
  • Prior to being shut down, Japan’s 50 main nuclear reactors provided 30% of the nation’s total electricity.
  • Before the disaster, some 40% of the nation's electricity was supposed to come from nuclear by year 2017.

By Melina Druga for
Melina Druga is an American writer and editor. She is the author of Enterprising Women: Practical Advice for First Time Entrepreneurs.

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