Japan plans to set up a government-backed insurance fund to put money into Tokyo Electric Power and pay compensation stemming from the disaster at its Fukushima Daiichi nuclear plant, the Nikkei newspaper said.
Aimed at saving Tokyo Electric from collapse, the plan would have the state initially shoulder the massive compensation costs, which the power company would then repay over several years via special dividends, the paper said.
Asia's largest utility, also known as Tepco, has yet to determine how much it will have to pay residents and business near the Fukushima plant, who were forced to evacuate after the March 11th earthquake and tsunami caused deadly radiation leaks.
Bank of America-Merrill Lynch has said the compensation bill for Tepco could reach $130 billion (€90 billion) if the crisis continues.
Tepco, which supplies roughly a third of electricity in the world's third-largest economy, had $91 billion of debt on its books before the March crisis, and has since taken on a $24 billion bank loan.
JP Morgan has estimated Tepco could face 2 trillion yen (€17 billion) in compensation losses in the financial year that started this month, while Bank of America-Merrill Lynch has said the bill could reach €90 billion if the crisis continues.
Tepco will make an initial compensation payment of 50 billion yen, president Masataka Shimizu told a news conference today, adding he did know how much the final bill would be.
Facing sometimes hostile questions from reporters, Mr Shimizu said the power company would be aggressive in cutting costs.
"We want to streamline operations with no exceptions in what we consider," he said during the conference, where he apologised and bowed.
"We are obviously thinking about pay cuts for our board and managers." Japanese media later reported Tepco will sell $1.2 billion worth of real estate to help pay victims. No one was available for comment at the utility.
Payments could be set at about one million yen per household, with all of those living within a 30km radius of the plant eligible, chief cabinet secretary Yukio Edano told a separate news conference today.
More than 200,000 people were living in the 30km Fukushima exclusion zone before the disaster. Tepco estimates about 50,000 households are eligible for the initial payments.
Mr Edano said the government wanted to start paying some of the victims before the "Golden Week" national holidays that start on Friday, April 29th.
Under the draft plan as reported by the newspaper, the government would set up the fund using loans from private banks - which it would guarantee - and surcharges on other utilities that operate nuclear plants.
The fund would handle the initial compensation payments, which Tepco would repay over the next several years by issuing new preferred shares to the fund that will pay dividends, the paper said.
Without such government support, Tepco would likely face having its debt rating cut to below investment grade, meaning some pension funds and other institutional investors would no longer be able to hold the utility's bonds.
What is not yet clear, however, is how much Tepco will have to ultimately pay in compensation, which would help determine the outlook for its credit rating, said Hiroki Shibata, an analyst at Standard & Poor's in Tokyo.
Reuters