Shareholders in Tokyo Electric Power Co., owner of the tsunami-crippled Fukushima Dai-ichi complex, have approved what amounts to the nationalization of the utility, ahead of what most likely would have been bankruptcy without government funding to handle a massive amount of claims from those affected by the March 2011 nuclear accident.
The utility received some one trillion yen ($12.8 billion) in taxpayer funding so it can remain economically viable, reports said. The funding, along with the shareholder vote, gave the government a 50.11 percent share in the beleaguered power company.
Nuclear Power Daily reported the deal includes a provision that allows the Nuclear Damage Liability Facilitation Fund to raise the government’s stake to 75.84 percent if the utility fails to implement required safety upgrades and reforms.
“We agreed to the plan because we urgently needed money and there was nobody else who could come up with ?1 trillion, except the government,” TEPCO Chairman Tsunehisa Katsumata said, noting that the plan permits the utility to buy back the government’s shares when it is financially able to do so. That said, the utility is liable to remain
“This was the best way forward,” he said, to ensure a stable power supply, avoid insolvency and avert a major financial crisis.
“I thought my holding of Tepco shares would become worthless after the disaster at the Fukushima Dai-ichi plant,” one shareholder said, according to The Wall Street Journal. “Instead, the share price is still hovering around ?100 or ?200. I believe the management has done a good job.”
The paper said one indication of the changed atmosphere at the meeting which sealed the deal, the number of shareholders fell from 9,309 last year to 4,471 this year. This year’s shareholder meeting lasted about five and a half hours, just a little short of last year’s when TEPCO was still dealing with the crisis at its heavily damaged plant.
Despite the deal; however, some skepticism remains over whether the company is serious about making changes to a corporate culture that critics believe was a contributing factor to the accident.
“In addition, as a regional monopoly and the nation’s largest power supplier, the company faces little competition and can expect government rescue no matter what happens, they argue,” WSJ reported.
As a way to build cash, the company announced earlier this year that it was raising electric rates by 17 percent on corporate customers and 10 percent on households.
The size and scope of what amounts to a TEPCO bailout was not lost on a number of observers.
Historic government takeover
“Not only is it the biggest state intervention into a private non-bank asset since America’s 2009 bail-out of General Motors,” The Economist said. “In Japan it is also historic.”
That’s because, the publication noted, with the exception of a brief period of nationalization immediately preceding and then during World War II, Japan’s power industry has always been “proudly private.”
“Sadly, those days are long gone. Since the 1980s the utilities have looked more like bloated government departments than red-blooded businesses. Their bosses have tended to be lawyers more familiar with pulling the levers of political than electric power,” said the magazine.
That, say critics of TEPCO, is precisely the kind of corporate culture that may have led to some cut corners and other discrepancies that may have deepened the nuclear accident there.
Also, there are other considerations. First, the rate hike; while it may be necessary for the company to return to profitability, there’s no certainty the public will accept that willingly. Also, it may be hard for so many who have been impacted by the disaster to find the trust to approve of TEPCO’s restarting of the plant’s formerly damaged reactors.
“If the utility, and its new government owners, fail to achieve either, the government may eventually have to stump up more money, and the banks may have to reconsider any commitment to keep the credit flowing. In that case, the light that is now flickering at the end of the TEPCO tunnel will go out again,” the magazine said.