May 19, 2024

Japan Weighs Nationalizing a Stricken Utility

TOKYO — Japanese lawmakers publicly debated nationalizing the Tokyo Electric Power Company on Tuesday, as there seemed no end in sight to the problems at the company’s crippled nuclear power plant.

The prime minister’s office said the government was not considering a takeover of Tokyo Electric “at the moment.” But the plunging stock price indicated investors were abandoning hope that the company could cope with the cost of its rebuilding and the potential liabilities from its nuclear disaster.

The share price plunged an additional 19 percent Tuesday with virtually no buyers, and trading was suspended by an automatic stop.

The closing price of 566 yen ($6.86) was the stock’s lowest close since at least 1974. The day before the March 11 earthquake, the shares closed at 2,153 yen (about $26). The stock collapse has already erased more than 2.5 trillion yen ($30.3 billion) in market value.

“There’s room for debate on the future of Tokyo Electric,” Koichiro Gemba, a member of the lower house of Parliament, said at a news conference. Mr. Gemba represents Fukushima Prefecture, home to Tokyo Electric’s damaged plant, Fukushima Daiichi. He is also the national strategy minister in the cabinet of Prime Minister Naoto Kan.

Mr. Gemba spoke not long after the country’s largest newspaper, Yomiuri Shimbun, cited unidentified people as saying the government was considering a plan to temporarily acquire a majority stake in the company, help it shoulder the liabilities that are likely to be incurred, and then eventually take it private again.

But fearing that a debate about the future of the company could create a divisive and costly distraction at a time of crisis, Mr. Kan and his chief spokesman, Yukio Edano, sought to tamp down the speculation.

“At the moment, the government is not considering” nationalization, Mr. Edano said Tuesday in a televised news conference. He added: “The first priority is the accident response. Then it needs to help those who’ve been affected.”

If the government were to acquire a majority stake, Tepco — as the company is known — would presumably issue new stock to the state, diluting existing shareholders.

The utility’s image has been hurt by the rolling blackouts it has imposed to cope with the loss of generating capacity after the earthquake and by the fact that its president, Masataka Shimizu, was not seen for several days after the quake. Tepco said Monday that Mr. Shimizu had been sick but has since returned to work.

Taxpayers outside the greater Tokyo area that the company serves are likely to balk at the cost of what could be seen as a bailout.

But with no end in sight to its nuclear problem, Tokyo Electric will have to lean on the state for support, analysts say.

“If you were the government, would you let it go bust?” said Paul J. Scalise, a former financial analyst who is writing a book on Japan’s electric power system. “I think the answer is no. The effect on the larger economy at a critical time would be too great.”

Estimates in the Japanese news media had already put the damage from the radiation leak to local homes, businesses and farms in the trillions of yen, even without knowing if anyone would suffer health damage. But it is impossible to calculate what the ultimate cost to the company will be. That is partly because the crisis appears to be far from over, and partly because it is not clear how much of the liability will actually be Tepco’s to bear.

Mr. Scalise said that under Japanese law governing compensation for nuclear damage, companies were liable for the cost of all nuclear accidents resulting from reactor operations except when the accidents were provoked by a “grave natural disaster of an exceptional nature or by an insurrection.” The company might plausibly seek to avoid liability altogether within that definition, he said.

Nicholas Benes, a former investment banker who is head of the Board Director Training Institute of Japan, an executive training group, said Tepco’s legal liability related to the Fukushima Daiichi plant would be covered by private and government insurance up to 120 billion yen, and even over that amount the government had wide latitude to provide financial assistance.

“I just don’t see the case for nationalization at this point,” Mr. Benes said. “Unless it’s for safety reasons — for example, if you think the company is utterly incapable of managing itself. But even then you’d have to assume that a bunch of nuclear engineers put together hodgepodge by the government would do a better job than the company’s own management. I don’t think the bureaucrats possibly believe that, or would want the responsibility.”

He and others said that Mr. Kan might also prefer to keep the company at arm’s length to avoid having it serve as a lightning rod for criticism of his administration.

Kazuma Ogino and Toshihiro Uomoto, credit analysts at Nomura Securities, suggested in a report that what was under discussion might best be described as “a virtual nationalization,” in which the state would provide the company “with the means of paying compensation on almost all fronts.”

If the state is going to end up paying most of the cost anyway, they wrote, “it would make more sense to temporarily nationalize Tepco” to “move ahead with the recovery work, rather than just paying compensation.”

The decline in the stock does not immediately endanger Tepco’s survival, although its cost of capital is tied to its share price. Tepco is in negotiations for loans of as much as 2 trillion yen ($24.25 billion), a person close to potential lenders said last week.

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