USA | Tepco Compensation Plan Passes Japan Parliament

Posted on August 3, 2011

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USA | WALL STREET JOURNAL | 3 August 2011

TOKYO—A bill to help utility Tokyo Electric Power Co. meet expected massive claims over the Fukushima Daiichi nuclear accident became law Wednesday, with both ruling and opposition party support.

The legislation creates a state-backed entity to financially support the company, which has said it would be unable to meet the potentially staggering costs of compensating those affected by Japan’s worst-ever nuclear-power accident.

The bill was passed by the opposition-controlled upper house of parliament after previously receiving approval in the lower house.

The legislation sets up an overall framework but puts off difficult decisions on how the government, the company, its stakeholders and other utilities will ultimately share the compensation burden.

The law states that the utility must restructure while seeking necessary cooperation from shareholders and other interested parties. But the legislation also emphasizes that since the government has been responsible for promoting nuclear energy, it will ensure that the state-backed entity fulfills its role.

Japan’s trade minister Banri Kaieda has said that the law should enable the company, known as Tepco, to avoid a heavy level of liabilities that could force it into bankruptcy. He said Tepco has asked its banks to maintain funding and has already rolled over some short-term loans at low rates.

Prospects for passage have helped push Tepco’s share price up from an all-time low of ¥148 hit ($1.92 at current rates) on June 9, although uncertainty remains over how much shareholders may be called upon to give up in exchange for the state support.

Tepco shares finished the morning session down 1.8% at ¥442.

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Posted in: USA