Tomoko Echizenya / Yomiuri Shimbun Staff Writer
Worried that Tokyo Electric Power Co. could fall into a serious money crunch as it struggles to deal with its troubled nuclear plant in Fukushima Prefecture, financial institutions both public and private have pledged to aid the massive utility.
Seven major banks have decided to offer TEPCO an emergency loan package of about 2 trillion yen, sources said. The government is also considering loans through the Development Bank of Japan and other government-affiliated institutions. This financial package--unprecedented in its scale--aims to wipe out any uneasiness over the utility's credit that has been caused by the nuclear accident.
In normal times, TEPCO procures short-term funds through corporate bonds and the commercial paper (CP) market, which offer better terms than bank loans. TEPCO issues the largest amount of corporate bonds in the nation, backed by its high credit rating. The amount of CP it deals in is also immense.
At present, TEPCO has abundant cash reserves of about 700 billion yen.
But as the crisis at the Fukushima No. 1 nuclear plant unfolded, major credit-rating agencies lowered TEPCO's ratings. So far, the difference in yields between government bonds and TEPCO debt has widened from about 0.1 percentage point to between one point and two points. As the utility's credit worsens, the company will have to pay more for access to much-needed cash.
Many economists believe TEPCO decided to seek financial aid from banks so it can continue to provide electricity, cope with the Fukushima crisis and prepare to pay damages caused by the nuclear accident.
Starting early last week, TEPCO began asking major banks for loans so it could secure 2 trillion yen by the end of the month. One executive at a major bank said TEPCO "has our full support."
Sumitomo Mitsui Banking Corp. will reportedly offer about 600 billion yen, Mizuho Corporate Bank 500 billion yen, Bank of Tokyo-Mitsubishi UFJ 300 billion yen, and Sumitomo Trust & Banking Co. 300 billion yen.
Furthermore, the Bank of Japan decided on March 14 to implement additional money easing measures by increasing its purchases of corporate bonds and CP. Many economists saw the central bank's decision as a way to improve electric power companies' ability to issue corporate bonds and access to CP, and some in the financial world have said the central bank's decision was essentially an aid package for TEPCO.
In addition, the government is reportedly considering making low-interest loans available to TEPCO under its crisis-management scheme via the DBJ and Shoko Chukin Bank.
The March 11 earthquake, tsunami and ensuing nuclear crisis have placed immense financial burdens on TEPCO. Costs to stabilize and shut down the Fukushima nuclear plant, and to repair thermal power plants damaged in the disaster, will strain the utility's pockets. In fiscal 2011 alone, TEPCO will likely have to redeem about 470 billion yen in bonds.
On top of these costs, paying for damages caused by the nuclear accident will likely be enormous. One analyst at a major securities company said it was "difficult even to predict" how much TEPCO will end up paying.
To address the situation, the government, the Bank of Japan and the financial industry have pledged their full support to the troubled utility.
Major life insurance companies, meanwhile, such as Dai-ichi Life Insurance Co. and Nippon Life Insurance Co., are also considering extending emergency loans to TEPCO to help it procure long-term funds from April, industry sources said.
According to the sources, after TEPCO asked the insurers for their cooperation, the firms began working out the details of an aid package, which will likely be several hundred billion yen, the sources said.
With banks assisting TEPCO to gain access to short-term funds, the major insurers will help the firm procure long-term funds for capital investments, necessary to get suspended thermal power plants back on line.
The life insurers have a vested interest in seeing TEPCO's financial standing remain strong, as Dai-ichi Life and Nippon Life are major shareholders in the utility.
Amid so much uncertainty, the utility on Wednesday said the amount of final dividends it would pay for this fiscal year was "undecided." Previously, the company said it would pay 30 yen per share.
"They could just be reduced, or there could be no dividends paid," a TEPCO spokesperson said.
TEPCO also announced that it will postpone indefinitely the release of its management plan, which will contain forecasts for supply and demand for the three business years from fiscal 2011. The plan was originally set to be released next Tuesday.
(Mar. 25, 2011)
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