JAPAN | Bill for TEPCO compensation faces uncertainty

Posted on June 16, 2011

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JAPAN | ASAHI SHIMBUN | 16 June 2011

Objections from lawmakers in both the ruling and opposition camps threaten to delay even discussions on a bill to compensate victims of the accident at the Fukushima No. 1 nuclear power plant.

The ruling Democratic Party of Japan aims to have the bill, submitted to the Diet on June 14, enacted by extending the current Diet session beyond the scheduled end of June 22. The bill would help Tokyo Electric Power Co. provide compensation to those affected by the accident.

But opposition parties, demanding that Prime Minister Naoto Kan step down at an early date, have not agreed on a Diet extension.

Under the bill, a new agency funded by 11 companies that operate nuclear power plants would support TEPCO’s compensation. The government would provide assistance in the form of bonds.

Even after the bill was drafted, some DPJ lawmakers said the government should shoulder the primary responsibility.

“The government bears the heaviest responsibility after TEPCO,” one lawmaker said. “It does not make sense if other electric power companies put up funds and bear a heavier burden than the government.”

The Liberal Democratic Party, the largest opposition party, is considering a counterproposal.

Some DPJ and LDP lawmakers, doubting that the government bill will be enacted soon, are separately preparing legislation that requires the government to pay provisional compensation.

The bill’s submission to the Diet helped to ease investor concerns about TEPCO’s fate.

TEPCO’s shares finished at 249 yen on June 14, rising by the daily limit of 50 yen from the previous day’s close. On June 9, TEPCO stock temporarily fell to a record-low 148 yen.

The government decided on the basic framework of the compensation agency on May 13.

Under the plan, financial institutions would be only asked to provide loans to TEPCO, with guarantees from the government.

But Chief Cabinet Secretary Yukio Edano and some other Cabinet ministers called on TEPCO’s creditors to waive the utility’s debts.

Their comments raised doubts among investors on whether the government was serious about bailing out TEPCO.

At the end of May, Standard & Poor’s Ratings Service downgraded TEPCO’s bonds to junk status.

“It is important to send a message to the market that the government will support TEPCO by submitting the bill to the Diet,” said a senior DPJ official said. “It doesn’t matter whether the bill will be carried over to the next Diet session.”

TEPCO is reluctant to pay damages other than the maximum 120 billion yen ($1.49 billion) provided by a government insurance system per nuclear power plant under the law on compensation for nuclear accidents.

If TEPCO shoulders damages on its own, it could face the wrath of its shareholders. TEPCO’s annual shareholders meeting is scheduled for June 28.

TEPCO has already paid 49 billion yen in provisional compensation to evacuees, farmers, fishermen and small businesses. Provisional payments are expected to increase further.

If TEPCO’s compensation obligations soar, its liabilities could exceed its assets.

“If the compensation agency bill is scrapped, TEPCO would go into bankruptcy,” a government official said.

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