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TEPCO claims could top $130b on Japan nuke crisis

2011-03-31 14:01

TOKYO - Tokyo Electric Power Co could face compensation claims topping $130 billion if Japan's worst nuclear crisis drags on, an analyst estimated on Thursday, fuelling expectations Japan's government will step in to save Asia's largest utility.

Investor concern about the future of Tokyo Electric grew on Wednesday after its president, Masataka Shimizu, was admitted to hospital and the company said that 2 trillion yen ($24 billion) in emergency loans from Japan's major banks would not cover its mounting costs.

The company, also known as TEPCO, has come under fire for its handling of the emergency at its Fukushima Daiichi nuclear complex, triggered by the March 11 earthquake and tsunami that left more than 27,500 people dead or missing.

A series of missteps and mistakes, combined with scant signs of leadership, have further undermined confidence in the company. Poor communication has led to some heated exchanges in media conferences as journalists demanded information.

The government and TEPCO conceded on Wednesday that there was no end in sight to the crisis.

"I think in the current situation the government has very few options left," said Ravi Krishnaswamy, Asia-Pacific vice president of Frost & Sullivan's Energy and Power Systems Practice in Singapore.

"Nationalisation isn't a good move for the stakeholders but at the end of the day if the government steps in then at least creditors know their liabilities will be met," he added.

Liabilities for compensation claims alone could be up to 11 trillion yen ($133 billion) -- nearly four times TEPCO's equity -- if the nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report.

Shares in TEPCO jumped 8.6 percent on Thursday, rebounding from three straight sessions when the stock has hit its limit-lows. The stock is down by three-quarters since the disaster.

Traders said a buy order for around 40 million shares, or about 2.5 percent of all outstanding TEPCO shares, was detected at the end of Wednesday's session, but they were unable to confirm who placed it.

Big hit

Bank of America-Merrill Lynch said a rapid resolution of the crisis was the only way to keep costs down and shareholders were very likely to take a big hit.

If the situation can be turned around within the next two months, costs may be less than 1 trillion yen. Costs will rise to 3 trillion yen if it drags on for six months, the analyst, Yusuke Ueda, wrote.

Experts, however, say a final resolution of the nuclear disaster is likely to take decades and there could be many further setbacks.

It took weeks to stabilise what remained of the nuclear power plant at Chernobyl in the Ukraine, the scene of the world's worst nuclear accident in 1986.

It took months to build a concrete and steel sarcophagus to try to protect the environment from further releases of radiation.

The UN nuclear watchdog, the International Atomic Energy Agency, suggested on Thursday that Japan consider widening an evacuation zone around the Fukushima plant, which would force more people and businesses to move.

More than 70,000 people have been evacuated from a 20-km (12 mile) exclusion zone and another 130,000, who live in a 10 km (6 miles) band beyond the exclusion zone, have been advised to leave, or to stay indoors.

Prime Minister Naoto Kan, facing mounting criticism for not expanding the evacuation zone, has said he was seeking advice. Experts say an extension may be inevitable.

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