Japan's Tepco compensation plan gets cabinet OK

Reuters News
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Posted: Jun 14, 2011 6:10 AM
Japan's Tepco compensation plan gets cabinet OK

By Yoko Kubota

TOKYO (Reuters) - The Japanese cabinet on Tuesday approved a scheme to help Tokyo Electric Power compensate for nuclear damages, a step forward in a slow-moving process that have frustrated not only affected residents and business but investors.

It remains uncertain when, or even if, the scheme will be enacted into a law given the shaky political status of highly unpopular Prime Minister Naoto Kan, who has been unable to push through several disaster-related bills in a divided parliament.

The decision comes three months after a massive earthquake and tsunami crippled a nuclear plant in Fukushima and one month since the government unveiled its framework.

Trade Minister Banri Kaieda, whose ministry regulates Tepco and other power utilities, told a news briefing the government aimed to submit the compensation bill to parliament as soon as possible. He also said that a substantial rise in electricity charges by the utility to finance compensation payments would be unacceptable and Tepco would have to sell assets to minimize tariff increases.

While the scheme was designed to restore market confidence by keeping Asia's largest utility solvent in the face of massive compensation claims, Tepco shares have been sliding and its credit default spread spiked, reflecting investors' skepticism about the fate of the scheme and Tepco itself.

"It's not the problem of the scheme per se. It's just that it has not been finalized into a law yet. that's what makes (the market) anxious. And there have been many comments in the meantime," an executive at one of the Tepco's creditor banks said recently. He declined to be named given the sensitivity of the matter.

Under the plan, a fund will be set up to help Tepco compensate people affected by the massive earthquake and tsunami so that the regional power monopoly in Tokyo and surrounding areas can keep supplying electricity.

The country's other nuclear power operators will be required to make annual contributions to the fund and the government will also inject money in it if necessary. Tepco will pay back the fund over an unspecified number of years.

(Writing by Tomasz Janowski; Editing by Abi Sekimitsu)